Have You Considered Buying Disability Insurance?
Updated : September 2nd, 2013
It is a cherished dream for any individual to have a good career so that one can pay bills on time, buy that dream home and car and enjoy financial freedom. Living life in the fast lane might not leave us anytime to think about possible hurdles.
What if something goes horribly wrong and those paychecks stop even before you retire? All your future plans and dreams come crashing down. That’s when disability insurance (DI) comes in. It provides an income to you and your family in case you are not able to work because of an injury or illness. Disability Insurance gives you the courage to dream without thinking about financial hurdles and you can stand on your own two feet till you reach your retirement and beyond.
What Is Disability Insurance (DI)?
Disability can be defined as a physical, mental or psychological inability to fulfill your occupational duties. It can be temporary or permanent.
Your ability to earn an income is usually considered your biggest asset. Disability insurance protects the beneficiary’s income against the risk that disability will make working impossible. It includes paid sick leave, short-term disability benefits and long-term disability benefits.
Disabilities Covered By The DI
Major illnesses, injuries and the conditions which one develops with age are also considered. Here are the major categories of illnesses that are covered by the DI.
- Musculoskeletal Systems – Under this category major dysfunction of joints and spine related issues which disables a person from working are included.
- Special senses and speech – Loss of vision or speech related issues.
- Respiratory system – Conditions such as chronic pulmonary insufficiency, Cystic Fibrosis, Pneumoconiosis, Bronchitis etc are included.
- Cardiovascular system – Chronic heart failure, Ischaemic heart disease, Peripheral arterial disease etc comes under this category.
- Digestive system – Includes Short bowel syndrome (SBS), Inflammatory bowel disease (IBD), Chronic liver disease Gastrointestinal hemorrhaging from any cause etc.
- Genitourinary Impairments – Impairment of Renal function, Nephritic syndrome with anasarca, persistent for at least 3 months despite prescribed therapy.
- Hematological Disorders – Chronic anemia, Sickle cell disease or one of its variants, chronic thrombocytopenia.
- Skin Disorders – Conditions such Bullous disease and chronic infections of the skin or mucous membranes, Dermatitis etc.
- Endocrine Disorders – Hyperglycemia, Adrenal gland disorders, chronic hyperglycemia, Diabetes and other pancreatic gland disorders etc.
- Congenital Disorders that Affect Multiple Body Systems: Category of Impairments includes Congenital Disorders that affect multiple body systems, non-mosaic down syndrome etc.
- Neurological – Epilepsy, Brain tumors, Parkinson Syndrome, Spinal cord or nerve root lesions due to various causes.
- Mental Disorders – Schizophrenia, paranoid and other psychotic disorders, Intellectual disability, Anxiety-related disorders, Somatoform disorders etc.
- Malignant Neoplastic Diseases – Category of Impairments includes Soft tissue tumors of head neck, soft tissue sarcoma, Lymphoma, Leukemia etc.
- Immune System Disorders – Systemic lupus erythematosus, Systemic vacuities, Systemic sclerosis, Polymyositis and dermatomyositis, Immune deficiency disorders, excluding HIV infection, Inflammatory arthritis etc.
What Are The Different Types Of DI?
Based on the nature and coverage one has six kinds of insurance to choose from.
Individual Disability Insurance
This insurance is for people who are self employed or entrepreneurs. The benefits and premiums may differ depending on the need of the individual in regards to the nature of profession, risk involved, state of residence. Higher the premium wider the coverage.
Business Overhead Expense Disability Insurance
Business overhead expense disability insurance is intended to refund a business for the overhead expenses incurred in case the owner suffers a disability. This insurance can help the owner with business expenses such as rent or mortgage costs, maintenance fees and other business related expenses.
Key-Person Disability Insurance
When a key person in a business becomes disabled, this insurance can give the business owner the benefits of continuing with the business transactions that the key person has left behind. This enables the business to move forward and go on without losing revenue and profit.
High-Limit Disability Insurance
This policy entitles the insured to a 65 percent income replacement benefit regardless of income level. This disability insurance is on top of a coverage and the most sought after.
Employer-Supplied Disability Insurance
This insurance is acquired by an employer for his employee. It is important to note that this insurance is only valid when the employee is hurt or disabled while working.
National Social Insurance Programs
The Federal Insurance Contributions Act (FICA) is a United States law that requires employees to contribute a part of their earnings to fund Medicare and Social Security. Employees who have become disabled can receive this income insurance for at least one year. Income insurance payments begin on the sixth month of disability.
It is a program managed by the Social Security Administration that insures a worker in case of a mishap. Disability insurance offers income protection to individuals who become disabled for a long period of time, and as a result can no longer work during that time period. Employees, who’ve paid the Federal Insurance Contributions Act (FICA) tax for a certain amount of time, are eligible to receive the Social Security disability income insurance.
How Much Does It Cost?
Disability insurance can be purchased as an individual policy or can be acquired by an employer for the employees. The cost of the disability insurance vary based on many factors such as benefit period, age of the individual, nature of employment, income etc.
Individuals who purchase a disability income policy can expect to pay about 1 percent to 3 percent of their annual salary.
Employers generally provide short or long term group disability coverage which is deducted from an employee’s salary.
How To File A Claim?
If you have been insured by your employer under the social security scheme then you can go on to the Employment Development Department site and can file a claim online. It is the easiest, continent and secure method or you can file it through mail.
Eligibility criteria for DI
DI benefits can be paid only after you meet all of the following requirements:
- You must be unable to work for continuous eight consecutive days.
- You must be employed or have been actively looking for work at the time you became disabled.
- You must have lost wages because of your disability or, if unemployed, should have been actively looking for work. You must have earned at least $300 from which SDI deductions were withheld during a previous period.
- You should have been under medical supervision of a licensed doctor during the first eight days of your disability.
- You must complete and mail a claim form within 49 days of the date you became disabled or you cannot avail the benefits.
- Your doctor must certify you as disabled.
Do I Need Disability Insurance?
If you believe in having security and peace in life and have a job then yes you need to have insurance. A recent social security fact sheet states, “Just over 1 in 4 of today’s 20 year-olds will become disabled before reaching age 67.” And if disease or injury renders you disabled early in your working life, the lost wages can be worth much more than a house or a car.
Don’t go the way where life takes you, take life the way where you want to go. Let not uncertainties change your life. Get a Disability insurance and anchor your life to the safe harbours.