Types of Disability Insurance

Types of Disability Insurance
If you work for a large or medium-sized company, you’ve probably never given much thought to disability insurance or life insurance.  Those are just a couple of benefits, (or “bennies” as that term is often used), that a company generally provides to its employees.  The larger the company, the cheaper the premiums are to the company, and they are able to provide some peace of mind to their workforce.  In fact, it is probably something that most employees just take for granted.

If you are launching your own company, or leaving a company where disability benefits have always been provided, you should ensure that you have a disability insurance plan in place as quickly as possible.

Bear in mind

Insurance premiums are one of the largest bites out of your budget.  Personally, you must pay for home and vehicle insurance.  In the workplace, your paystub reflects whatever portion you share with your employer for the privilege of having health-related insurance.  You should never “go bare”, i.e. forego having health-related insurance, because one catastrophic incident would wipe you out in a heartbeat; sadly, not having disability insurance in place could likewise take your every asset as you struggle to keep up with payments for your largest liabilities like your house, car, utility and credit card payments after suddenly you find yourself unable to work and make these payments.  If that scenario sounds scary, it is meant to be.

Disability insurance should not be confused with workers’ compensation insurance.  These are two different concepts.  While disability insurance ensures that you are receiving funds comparable to those you receiving when you worked, workers’ compensation provides payment for employees who are unable to work because of a job-related injury.  Like disability insurance, it is also considered income insurance, but also includes reimbursement/payment of medical expenses or insurance for damages such as pain and suffering for injuries received while on the job.  Those last few words are the main component of workers’ compensation.  If an employee is injured or killed while on the job, the benefits will kick in – injuries or death off the job do not count.  Statistically, most major disabilities occur while the employee is off the job, so he or she is not covered under workers’ compensation.

As stated above, if your employer does not provide disability insurance, or you are self-employed, you should ensure you have disability insurance in place.  Below, the types of disability insurance are discussed.

Short-term vs. long-term disability insurance

In general, you can begin to receive benefits within two weeks of your initial claim.  Claims do not always have to be an unexpected event, like an accident, but some of the top types of short term disability (“STD”) claims are normal pregnancy, injuries, pregnancy complications and such medical woes as cancer, digestive issues and back injuries.  Long-term disability (“LTD”) is just as it sounds, benefits received for injuries that will take you out of the workplace for an indefinite amount of time.

A disability that qualifies you to use disability insurance may be defined as any type of mental or physical illness or injury which prevents you from performing your regular or customary work.

Disability insurance should be in place from the day you begin working in the real world.  Your first job in high school like flipping burgers after school, or working as a camp counselor every summer doesn’t really count as you are no doubt still living at home with your parents and not incurring any debt.  But, once you enter the work world and begin acquiring assets, like a home or car and real responsibilities like making mortgage or car payments, it is imperative to guarantee that if you are incapacitated and unable to continue working, whether in the short term (paid sick leave and comparable short-term benefits) or long-term (permanent disability benefits), you are still assured an earned income comparable to what you were earning before the incident.  If you have questions about disability insurance and live in NJ you should contact a company that provides disability insurance in Livingston.  Livingston insurance companies are skilled at answering any insurance related questions and can help you come up with the best policy for your needs.

Traditional individual disability insurance

Your employer does not have to provide disability insurance – that benefit should be considered a perk.  Any individual, whether employed by a company or self-employed, who lacks disability insurance coverage may purchase their own policy.  Beware… wading through the various types of disability insurance will yield much disparity as to premiums for individual coverage as to various companies.  Also, there are factors such as your occupation should you need to make a claim for those benefits, the frequency of payments (i.e. monthly) and how quickly the benefits are put into place once you make your claim.  Additionally, premiums may be higher for disability insurance policies that define disability in broader terms, i.e. the policy pays benefits for a much-wider variety of circumstances.

It is difficult to think ahead sometimes and try to perceive what benefits you would want to receive from your disability payments when you are a viable healthy working individual.  For that reason, many disability insurance websites provide an insurance calculator to assist you in determining the proper coverage should an unforeseen incident occur.

In picking and choosing criteria for your disability insurance versus extent of coverage, the same principles of coverage apply like home or vehicle insurance.  Sure, your premiums could be less now by eliminating extensive coverage, but being penny wise and pound foolish may result in more expenses for you should you need to make a claim.  For example, some insurance companies have high-limit disability insurance for high-income earners.  Though the traditional long-term disability benefits for most persons gives them the ability to recoup approximately 65% of their regular income or anywhere from $20,000.00 to $30,000.00, high-income earners could receive an additional $2,000.00 to $100,000.00 per month.

Other forms of disability insurance

Above, the importance of an individual having disability insurance was discussed.  That person may be a traditional worker or self-employed.  To understand the importance of disability insurance in a workplace, take a look at these examples set forth below.

In the case of a business, the owner may purchase business overhead expense disability insurance.  This will ensure that should the owner of the business experience a catastrophic disability, the business will be reimbursed for overhead expenses such as rent/mortgage/leasing obligations, business insurance, property tax, employee salaries and benefits and any other type of monthly expense such as utilities.

A person may not own the particular business but be an important player in a company.  That company may purchase key person disability insurance which will provide crucial benefits to protect the company from financial hardship resulting from the absence, for the short term or otherwise, of a key employee.  The company may choose to use the short-term disability provisions in its policy to hire a temporary employee, or, if the disability is permanent, there is the option to hire a permanent replacement and reimburse the company for the costs of recruitment and training expenses associated with the new employee.

Consider consulting with an insurance broker.

If you’ve chosen to be proactive about disability insurance, and a tour of disability insurance websites leaves you a little battered and bewildered, consider consulting with an insurance agent who specializes in disability insurance company right here in the Livingston, New Jersey area.  His or her knowledge and understanding of the various types of disability insurance available will help to create the perfect fit for you, your occupation and your budget.