Disability insurance is a form of coverage that will replace a percentage of your income should you be unable to work because of injury or illness. Most policies are written to pay a specific monthly benefit with the upper limit typically being between 50% and 70% of your earned income.

EIGHT TYPES OF DISABILITY INSURANCE

• Individual Disability Insurance- Individual Disability Insurance is a typical type of policy with the covered individual paying higher premiums for more desirable coverage. Policies are subject to standards of health, age, occupation, etc.
• Group Disability Insurance Through An Employer - Group Disability Insurance Through An Employer is offered by an employer. The majority of the policy definitions and structure are chosen by the employer. Many of the choices are eliminated. Coverage is more readily available to persons with health problems, but coverage stops when employment is terminated.
• Group Disability Insurance Through An Association - Group Disability Insurance Through An Association is coverage that is priced to be attractive for younger group members. Conditions of insurability are enforced. The coverage is available for as long as the individual is a member of the association.
• Social Security Disability Benefits - Social Security Disability Benefits is a Federal program that pays benefits to all disabled individuals under the age of 65. The program also pays supplemental benefits to individuals over age 65 who have limited incomes.
• Workers Compensation - Workers Compensation is a state mandated coverage that pays benefits for persons disabled because of work related injuries or illnesses.
• VA Benefits - VA Benefits is a Federal program that pays benefits to military veterans who are disabled due to service related health problems.
• Federal Employees Retirement System - Federal Employees Retirement System is a program that covers Federal Employees. The payment of benefits is up to 60% for the first year and 40% thereafter.
• State-Sponsored Coverage - State-Sponsored Coverage is a program offered by some states (including California, Hawaii, New Jersey, New York, and Rhode Island). It pays short-term benefits to residents who are disabled due to issues not related to work.

PERIOD OF COVERAGE

Policies can be purchased to cover either short-term or long-term disabilities. Short-term disability policies pay benefits for up to two years. Long-term disability policies pay benefits for periods ranging from a few years to age 65.

The waiting period before collecting benefits is an important aspect of a policy. A disability policy will require that a person be out of work for a certain period of time before receiving benefits. For a long-term disability policy, this “elimination” period can be as short as 30 days or as long as two years. Ninety days is a common duration for the elimination period.

KEY TERMINOLOGY TO UNDERSTAND IN A POLICY

• Total Disability- unable to work due to injury or illness
• Partial Disability- unable to perform every duty of your occupation after returning to work following a disability (transition state)
• Residual Disability- similar to partial disability, but benefits are payable based on reduced earning capacity- generally a part of a long-term policy
• Presumptive Total Disability- disability which results from loss of sight, hearing, or limbs
• Own Occupation- terminology used to define disability as the inability to perform the customary duties of one’s own occupation
• Any Occupation- terminology used to define disability as the inability to work at any occupation, perhaps with the qualification of a comparable level of education or training

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