There may be a time in life when you may not be able to work due to illness or some other medical condition, whether temporarily or permanently. Such a condition may result in a loss of income during that period. While the state does provide compensation at such times through social security programs, many insurance companies too offer insurance against loss of income during the disability period.
Although nearly all insurance companies offer disability insurance, the terms may differ according to each company’s policies. Since insurance companies are in business, they keep their business interests foremost. Hence, it is advisable to understand the implications of the terms before buying disability insurance. The terms and conditions laid out in the policy document should be studied carefully, and any ambiguities should be clarified with the insurance broker.
Disability is defined as a medical condition that prevents working in an occupation which a person has ‘enjoyed or has become accustomed to’. When you buy a disability insurance policy, make sure that the terms of the policy articulates an express statement about this. This is important, because under the terms of many companies, disability is a condition that prevents you from being gainfully employed in ‘any’ occupation.
The implication of this being, that even though you may be unable to work in the occupation you were engaged in just before being disabled, but are able to work elsewhere, you would not be entitled to receive the disability benefit. Therefore, in order to enable you to receive the disability benefit when you are unable to pursue the job in which you are skilled, the terms should state that entitlement shall accrue when you are unable to pursue your ‘own occupation’.
Then, check the elimination or the waiting period, which denotes the time between the beginning of the disability, and the first payment under the policy. You can opt for an elimination period of 30, 60, 90,180, 360 or 720 days. Your choice would govern the amount of the premium. A shorter elimination period would attract a higher premium.
Finally, check the benefit period, which is the duration for which the benefit is payable. This can be a 2 to 5 year period, depending on the type of policy. Some companies have policies that cover payments of up to 65 years of age. Longer benefit periods have higher premiums.
Disability has been divided into two categories: the first being short-term disability, and the other long-term disability. Illness, physical injury or pregnancy is covered under the short-term disability. However, no benefits are payable under this category, if the policyholder is qualified for workers’ compensation. Besides, the period of disability without medical supervision is also excluded. This category of coverage elapses after 180 days. Any disability beyond 180 days comes under the long-term category. The coverage starts from the 181st day of the disability, and the benefits are payable up to regular retirement age, based on the date of birth.
A disability insurance policy can be purchased to pay monthly payments from $300 to $5000, subject to a maximum of one third of the gross monthly salary.
The kind of insurance policy is a means of providing much needed support in times of distress, caused by loss of income due to the inability to work, because of a medical condition. It has great value and it would be prudent to opt for one to secure your future.