- Legal EditorHenry Dahut, J.D.
Henry Dahut, J.D.
Attorney - Legal Publisher - Educator
Henry Dahut is a licensed California trial attorney. Over the course of his 30-plus years practicing law, Henry has represented and counseled countless clients in legal trouble.
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Disability insurance is expensive. What’s more, disability claims tend to be heavily scrutinized by insurance companies and their teams of attorneys.
Should you be considering purchasing disability insurance, this article will assist you in understanding the basics of disability insurance and help you make a more informed decision.
How Does Social Security Disability Work?
Suppose you suffer a disabling injury or illness and can no longer work at your job for an extended period. In that case, you may be able to replace a significant percentage of your income by purchasing long-term disability insurance.
What Is The Difference Between Short and Long term Disability Insurance?
Short-Term Disability Insurance
Disability insurance, called short-term policies, usually has a maximum benefit length of only two years.
Long-Term Disability Insurance
Disability insurance, considered a long-term policy, has a benefit length that expires when you do – for the rest of your life.
How Common Are Work Disabilities?
According to employment disability studies, it has been estimated that 1 out of every 4 American workers will suffer some form of disabling injury or illness before they reach retirement age.
What Is Disability Insurance?
Disability insurance is an insurance product designed to replace 45-65 percent of your gross income on a tax-free basis should an injury or illness prevent you from earning an income in your chosen occupation.
Differing Definitions of Disability
How is disability defined?
Some policies consider you disabled if you cannot perform the duties of any job. Better plans pay benefits if you cannot do the usual duties of your occupation.
However, not all disability companies define “disability” in the same way. Some companies define disability based on the type of work you can do.
Others may define it by the condition you have been inflicted with and deny disability coverage if you can still perform related types of work.
Will My Employer Cover Disability?
Employee Benefit Plans
That depends on whether it’s a part of your employee benefit plan. Some employers, as part of the employer-employee benefit plan, provide disability insurance. This type of insurance is costly, so most employers do not offer this type of coverage.
Does Disability Insurance Cover 100 Percent of My Former Income?
No. Disability insurance is not intended to cover 100 percent of your former income. Most cover somewhere between 45 to 65 percent of your lost income.
When do disability benefits begin and end?
Initial Waiting Period
Most plans have a waiting period after an illness before payments begin. This gives the insurance company additional time to thoroughly investigate your claim and determine whether they will challenge it.
Unfortunately, insurance companies have proven aggressive in finding reasons to deny coverage, ensuring you are dealing with a reputable insurance company.
How long do disability benefits last?
The length of the benefit period varies depending on the type and quality of the disability policy you purchased. It can range from two years until you are eligible for retirement or upon your death.
After the initial waiting period, payments are usually available until you reach age 65, though shorter terms are also available.
What Type of Questions Should I Ask Before Purchasing Disability Insurance?
The Consumer Action Handbook suggests that you ask the following questions before you purchase disability insurance:
- Should I become disabled, what specific dollar amount will I receive?
- Will my benefits be reduced by Social Security disability or workers’ compensation payments?
- Will my benefits be adjusted for inflation? If so, what index is used?
- Will you continue making contributions to my pension plan?
- Will you cover commissions or bonuses on top of my base salary?
- What about my 401(k) or other retirement contributions? How does this work?
- Will, the payout goes up should my income goes up in the future?
- Will you guarantee I can renew my policy yearly at the same rate?
- What if I’m unemployed and can’t pay the premium for a short period? Is there a grace period?
- What injuries or illnesses does my policy expressly exclude? If I’ve been treated for specific ailments like post-traumatic disorder or neck pain, will you not cover those preexisting conditions?
Locate A Social Security Disability Lawyer
The National Organization of Social Security Claimants have their own lawyer referral service. You can call them at 845-682-1881, and your call will be transferred to an attorney in your area. You can also visit their website for more information.
