What is disability insurance?
Disability insurance provides replacement income for all or part of your wages if you are unable to work due to illness or injury. It can be short term or long term. When employers provide disability insurance they usually have separate short term and long term policies. The reason for separate policies is that short periods of disability are more likely than long one. Consequently, short term policies have higher premiums. Long term polices are like umbrella liability policies. They insure against events that are unlikely to happen, but they provide higher limits if needed. They are also more affordable that short-term policies for what you get.
Video: Health & Disability
Insurance
Do I need disability insurance?
Unless you are independently wealthy and can afford to sustain yourself without wages indefinitely, you probably need disability insurance. This is especially true because of the other things that often happen when you are disabled. You normally have significant ongoing medical bills, but if you become unemployed your company-provided health insurance usually stops. You do have the opportunity to continue under a COBRA policy, but those premiums are usually quite expensive. When you have no income because you’re disabled it’s very hard to pay premiums. Some companies in the past have had policies which continued to cover you under those circumstances, but those were premium policies and carried premium price tags. Given the trend in recent years to put more and more of the cost burden on the employee, it would be very hard to find such a policy today.
So you’re now disabled, have no money to pay your normal bills, have big medical bills arising from whatever caused your disability, and can no longer pay health insurance premiums, let alone the deductibles and co-pays.
OR, you can buy disability insurance. If you do, your income continues, you can still afford health insurance premiums and pay your bills. Most people prefer this scenario to the first one, and experts prefer it as well. However, due to cost considerations, you should focus on long term disability. Short term disability only covers about 3 months (some policies may cover 6 months). The coverage is expensive, and if you have to purchase disability insurance yourself you should buy long term, and save enough to get you over the waiting period.
Video: Why You Should Have
Disability Insurance
Disability insurance payments are usually about two thirds of your wages, but they are non-taxable, so the purchasing power in roughly equivalent.
Won’t Worker’s Compensation take care of me if I’m disabled?
If you are disabled by an injury you suffer at work there will be some compensation. However, it is not based directly on your wages, and may not be enough. Workers compensation is driven by state regulations and state offices. If you want further information regarding the laws in your state, you’ll need to contact the appropriate office. I n any case, if you are injured off the job, or if you get an illness that was not caused by your work, you do not get any compensation.
The bottom line is that you need income even if, or especially if, you become unable to work. The most reliable, predictable way to achieve that result is to buy long-term disability insurance.
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