What Is Disability Insurance?
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What Is Disability Insurance?
In exchange for you or your employer making premium payments, disability insurance provides you with benefits that make up some of the income you lose when you can’t work due to a medical condition. Some disability insurance policies will pay benefits only if you can’t work in your current occupation, but not if you can work in another occupation. Other policies cover a disability for a specific occupation, such as for a surgeon who has carpal tunnel syndrome and can’t operate.
Things To Know
- Disability insurance is meant to replace your income from a job during a specific amount of time.
- Policies may be short-term or long-term.
- Disability programs are also provided by government. Social Security is one example.
How disability insurance works
Disability insurance is designed to replace your income stream from a job during a specific period of time. Typically, the insurance will pay part of your salary—payments generally range from 50 to 70 percent of your salary—once you’ve been off work for a legitimate medical disability for a specific amount of time. In most cases, a doctor must certify your disability and the insurance company must approve your claim before benefits are paid. A disability is defined as the inability to perform job functions due to a physical or mental medical condition.
Two types of policies
Policies fall into two categories: short-term and long-term. Short-term disability insurance covers a short-term inability to work due to an illness or accident, generally no longer than a year in duration. Most long-term disability policies kick in after a three- to six-month waiting period or when short-term disability policies terminate. Long-term disability benefits are generally provided for people with severe injuries or illnesses that will keep them unable to work for years, or even for the rest of their lives.
Public disability programs also exist
You’re probably aware of public disability programs designed to provide income replacement insurance for the long term. Social Security provides long-term disability payments to people who are seriously disabled and unable to work, while the Veteran’s Administration provides disability benefits to military veterans who were disabled in the course of service with one of the armed services. State workers’ compensation programs provide disability coverage for workers injured while on the job.