Disability Insurance Makes a Big Difference If the Unthinkable
A Policy Can Help Tie You Over Till Social Security Disability Kicks
Imagine being sick and out of work for a long period of time - not
just a few days - but for several weeks or even months. And imagine not getting paid for that time spent away from
work and how devastating that would be for you and your family.
Although most of us make sure to insure our car, house and lives - many of us don't understand the importance of
insuring against lack of income from our jobs. More than 80% of American workers don't have any type of disability
insurance. And almost 50% of home foreclosures in the United States are due to homeowners being out of work from
long term medical issues.
Many employees assume that if they are sick, normal sick time pay will cover them and for a short term sickness,
this is generally true. The problem potentially occurs when a worker is out sick for several weeks or months and
has exhausted their sick time.
If you are out of work for a long time and have no more sick time, social security won't necessarily cover the
lost wages. Not everybody is approved for social security disability benefits - and it can also take several months
to determine eligibility. Even if a person qualifies, the social security benefit may not be enough to make up for
the loss in salary. And most people don't have nearly enough in savings to cover a long absence from work.
That's basically where disability insurance comes in. As the name suggests, this type of insurance is designed
to replace a percentage of your income lost from not working for an extended period of time due to illness or
disability. If your employer offers a benefits package every year, chances are that disability benefits are one of
There are basically two different types of disability insurance - short term (STD) and long term (LTD)
insurance. Short term disability insurance generally covers a period of absence from work of up to two years; long
term disability generally covers a period from two years until retirement age. The average length of time missed
from work due to disability is around two and a half years.
Individual disability insurance will generally cover between around 50 to 70% of your normal income if you are
out of work. Insurers don't like to cover the entire amount of a person's income for fear they will be inclined not
to go back to work!
You also generally have the option of paying more in premiums to have a higher percentage of your salary covered
in the event of you being out of work. Most disability policies cover the insured until the age of 65, after which
time normal social security disability benefits will cover you.
The amount of disability premiums vary and are determined according to several factors including a person's age
and sex. The amounts are also determined by what kind of work a person does and how risky it is - premiums for a
construction worker are likely to be higher than for an office worker.
If you are in the market for disability insurance, try to take out what is known as a "non-cancelable" policy
which locks in your benefits and rates. The insurance company can't make changes to the policy unless requested by
the policy holder.
So the next time the opportunity arises, consider disability insurance carefully. It may be something none of us
like to think about - but it could make a big difference if the unthinkable happens.