Disability insurance is a coverage that assists people who can no longer work due to non-work-related illnesses or injury. For example, say you are diagnosed with a debilitating disease. While you are recovering, your doctor says you cannot work. Suddenly being out of work can cause heavy financial turmoil for you and your family, which is why disability insurance offers coverage for just such incidents.
Keep in mind that disability insurance may only cover a portion of your paycheck. You will not receive the full paycheck on disability insurance as you would if you were normally working. Coverage is in return for monthly premiums you pay to an insurer. Disability insurance can be purchased through many employers or purchased separately.
So long as you pay your insurance premiums, you should have coverage in case a disability renders you unable to work.
Types of Disability Insurance
There are two main types of disability insurance: long-term and short-term disability. Short-term disability policies pay up to about two years for lost wages while long-term policies can last as long as the disability.
For example, if say you are involved in a car accident and suffer a spine injury that affects your legs. You cannot work while you are recovering, including physical therapy and rehabilitation. After a few months, you are cleared to work again. In this case, you would need short-term disability insurance to supplement your lost income while you are unable to work.
On the other hand, say you are diagnosed with a common cancer. As you begin treatment, you are unable to work. Unfortunately, cancer is known for being hard to get rid of and has a habit of coming back. You could go through treatment for several years, during which you would not be able to work. A long-term disability insurance policy will help with your income during this period.
Disability Insurance vs. Workers Compensation
Your employer likely offers workers compensation, which includes disability benefits. There is a difference between the benefits offered by workers compensation than through disability insurance, however. Workers compensation only covers disabilities that result from a work-related accident or injury. Unlike disability insurance, workers compensation will only cover disabilities you obtain at work. If your disability is unrelated to your work, it will not be covered by workers compensation.
Can You Receive Disability Insurance and Unemployment Benefits Simultaneously?
Unfortunately, you cannot receive disability insurance benefits alongside unemployment benefits. Make sure to speak with your insurance agent about what coverage you need and what benefits are best for you.
No one person is the same. You will need a policy tailored for your specific wage replacement needs.
How Do You Qualify for Disability Insurance?
To qualify for disability insurance benefits, your situation must fall beneath the policy’s determinant of a qualifying disability. You may qualify for disability insurance benefits if you cannot work like you did before, you cannot adjust to new work due to your medical condition, and you meet the previous income requirements.
How Much is Disability Insurance?
The cost of disability insurance primarily depends on your annual salary, as this insurance is designed to help replace a portion of your income. For example, if your annual salary is $50,000, you may pay around $500 to $1,500 a year (about $60 to $125 a month) for disability insurance. On the other end, if you make $200,000 a year, you may pay between $2,000 and $6,000 a year (about $166 to $500 a month) for disability insurance.
Be sure to shop around to compare questions and ask your insurance agent about how much you may pay for disability insurance. If you change jobs and receive a pay raise or pay cut, you will want to adjust your disability insurance policy accordingly. Having too little insurance can leave large gaps in your coverage. Keep your insurance provider informed about job changes. This includes if you have disability insurance through your workplace. If you plan on leaving, you will want to ask your new employer if they offer disability insurance or look into purchasing disability insurance individually through a private insurer.
If you have any questions about whether or not you need disability insurance, be sure to ask an insurance agent. It can be scary to be struck with a sudden illness or disability that takes away your ability to work. Disability insurance can protect you and your family from a potential financial hit and give you peace of mind while you recover.