A Summary of Disability Insurance

Often called disability income insurance, disability insurance ensures the benef
iciarys earned income and includes paid sick leave, short-term and long-term disa
bility benefits. The Social Security is one type of disability insurance that is
provided by the government and they offer a floor beneath which everyone, eithe
r uninsured or underinsured can benefit. As a result of their coverage, they are
large programs with many beneficiaries. The other form of disability insurance
is one provided by employees to cover for their employees after getting hurt on
the job. Workers compensation and the basic disability insurance policies are exa
mples.
Workers compensation offers payments to those who are either temporarily or perma
nently injured and who may not be able to work. This form of insurance is howeve
r more than just a compensation since it pays for both past and future economic
loss, reimburses medical expenses and its benefits are payable to the workers dep
endents. When it is used to pay for medical expenses, it functions like the heal
th insurance. For those who desire disability insurance but whose employers do n
ot provide these benefits, one may choose to purchase their own policies on the
open market. The premiums and the benefits of these individual coverage schemes
vary considerably between States, companies and different occupations. For polic
ies that define broader terms where the policy would pay for wide variety of sit
uations, the premiums are often higher as is the case with those that provide mo
re monthly benefits.
A number of variables determine what is covered and the duration of a disability
insurance coverage. For example, an insurer is legally obligated to specify the
terms of coverage, what coverage is and what is being bought with the premium.
Workers compensation in this case would therefore not cover a disability claim th
at is not job-related. How long the insured should wait before claiming payments
is another important variable consideration. Most insurance coverage is cheaper
because most disability events are temporary. When policyholders agree to wait
longer before they can claim payments, this also results in lower premium paymen
ts.
Most disability insurance policies will pay some percentage to the beneficiaries
such as 80 percent of the regular salary for a period of about 5 years. Alterna
tively, some policies will pay a flat amount of say, $1500 per month regardless
of the salary amount. This prevents the beneficiaries from such things as mortga
ge foreclosure or running up huge debts during the convalescence period.