How Disability Insurance Functions?


There are some people who never get tired of harping on the wrong string that accidents and ailments are a few and far between. Even if you come up with facts and figures, they won’t acknowledge the reality because illusion and pretension help them live in their comfort zone. But if you are not in luck, odds won’t swing in your favor.

Statistics in the USA points out to a horrifying scenario where one in four 20-year old adults will be disabled before hanging up the boots.

The only silver lining in the scary situation is the disabled people will have a chance to set up a shield of protection around them in terms of short-term and long-term disability insurance benefits that are designed to safeguard their paychecks. The benefits extend to the families of disabled people if they are unable to work due to their injury or illness.

How Disability Insurance Functions?

Disability insurance benefits are classified under two heads – Short-Term Benefits and Long-Term Benefits. The short-term version gives you a part of your paycheck for a short span of time (usually 3-6 months).  Most people receive their STDI via their employer. However, it is possible for you to receive an individual policy through some private insurance companies. But the latter is more expensive than it’s worth.

LTD is designed to provide coverage for a longer span of time (for years or even decades). Though not very common, LTD benefits are also granted through employers. However, coverage is not enough for disabled people’s needs. This reasons why many people go with supplemental LTD policies. You are also entitled to opt for an individual long-term disability policy if you don’t get the benefits through your employer. Let’s look at the conditions that qualify for LTD benefits:

Own Occupation Disability Insurance: Under the policy, disability is defined as the inability to continue with your regular job even if you are fit enough to take up another occupation.

Any Occupation Disability Insurance: Under this policy, the condition qualifying for disability is defined as your inability to work at any job. This insurance sets up a more stringent form to qualify for disability insurance benefits as your disability should not be limited to your current occupation but extended to any occupation that earns your livelihood. This policy, though harder, is less expensive.

Salient Features of Long-Term Disability Benefits

It’s better to choose an ‘Own Occupation Disability Insurance’ policy if you can afford it. A guaranteed renewable and non-cancellable policy (sometimes coming as a rider) are highly recommended. Non-cancellable policies make it impossible to change the terms including premium rate as long as the premiums are not missed. The term “Guaranteed Renewables” makes your insurance policy non-cancellable as long as you don’t fail to pay premiums in time.

Both Short-Term and Long-Term policies, when available in tandem, work best to match your purpose. Long-term disability insurance does not roll out right away. You need to wait out an elimination period that usually ranges from 30-365 days. Until the long-term scheme kicks in, the short-term version hopefully sustains you during your hard days.

Long-term benefits usually give you support for two, five, or ten years or even longer until your retirement. On average, disability claims last for a little less than three years.