Serving Pennsylvania & New Jersey

Disability Insurance

disibility-insurance-imgDisability insurance is purchased (or is an employee benefit) and is used to protect your potential for future earnings. Disability insurance is supposed to replace your income in the event that you become physically or mentally unable to work. Most people have health insurance to cover medical costs due to a severe injury or sickness however, without disability insurance, not many individuals are prepared for the loss of wages that follow a tragedy.

Two Types of Disability Insurance

There are two types of disability insurance: short-term and long-term. There are two distinct types of disability insurance coverage: (1) Individual Disability Insurance (Private Disability) and (2) Group Insurance (ERISA).

Short Term Disability Coverage

Short-term disability coverage will replace a portion of your salary in the event you miss up to six months of work. This type of coverage typically kicks in after all sick leave is exhausted, and replaces close to 100% of wages. The length of coverage and payment percentages will vary from plan to plan and are based on your total number of hours worked or years in the plan.

Long Term Disability

Long-term disability insurance can be purchased to replace somewhere between 50 and 70% of your salary. Some employers allow their employees to purchase extra insurance from your company, sometimes raising that coverage to 80%. Some have particular rules, which can be found in the Summary Plan Description for your plan. You can get this information from your Benefits Department. A Long Term disability policy can be designated as an “own-occupation” policy. Most policies are “any-occupation,” which means the policy owner must work when he or she is capable, even if it is not in the same capacity as before. An “own-occupation” policy will allow the owner to collect benefits until he or she can resume their previous occupation. Typically, these policies are more beneficial to business owners or policy-owners with high-skill or high-paying jobs.

What Experts Are Saying About Long Term Disability Insurance

Experts say that long-term disability insurance is the most important insurance you can purchase because a lot more diseases and injuries are now disabling rather than fatal, meaning that your incapacitation or disability can be lengthy. Most long-term disability policies vary in the length of payout. Some policies will only pay out for 5 or 10 years, whereas some will pay out until age 65. Policies typically vary in definition of disability and exclusionary criteria.