What exactly is Disability Insurance?
The easy explanation is to tell you that if you are unable to work because of a disability, an insurance company will pay you a specific amount of income, for a specific period of time, under certain specific conditions. There are basically two types of disabilities: 1) caused thru an injury or 2) caused thru an illness.
The amount of coverage that you can get is generally relative to your current income level. Usually you can cover up to 75% of your income. We’ll use a simple example of a person earning $48,000 a year. 75% of that is $36,000 which converts to $3,000 a month of income protection available. Many Insurance companies require verification of income and medical questions to be answered. Some insurance companies will look at gross revenue statements and some companies offer guaranteed to issue products.
To be considered disabled, usually it requires a statement from a doctor that you are unable to work for certain reasons, you must not be working, and you are under the care of a physician. There are usually limitations on these types of plans and you must review carefully the terms and conditions in the policy. Be cautious on “any occupation” clauses. Usually you have a choice of how long you will be paid a benefit, 2 years, 5 years, when a specific total is paid, or even perhaps to your age 70. The better your benefit, the more the cost.
Injury benefits will pay you in the event of an injury, which is usually understood to be a “sudden and unexpected event”. Whether you trip over your kids bikes when you walk up the sidewalk at home and break your leg, are in a car accident, or fall off the ladder while cleaning out the eavestrough, you are injured and considered covered. Some injury benefits will start on the very first day of injury. If you are off for a week, your benefit claim would be prorated. If you selected a 30 day waiting period, you must wait for 30 days before you are eligible for a claim.
Illness benefits will pay you if you are unable to work, because of some type of illness, for at least 30 days. It is meant to replace income in the event of a more serious illness. Not really for the flu!
Some companies have Guaranteed to Issue, or Guaranteed Issue diability insurance injury products and do not ask a lot of questions. All illness applications will require some medical evidence. If this is an area in which you are interested, and you want some specific information and/or a quote, please click here.