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Exploring the basics of disability insurance

Monday, February 19th, 2018

People have health insurance to cover their medical expenses when they are injured or ill. However, what happens when a person becomes disabled and cannot earn an income for a significant period of time? It won’t take long for a person to burn through their paid sick leave and vacation time. Health insurance covers medical expenses, but it does not reimburse a person for the income lost when a medical condition keeps a person from working for an extended period of time. That is when having another type of insurance is important: disability insurance.

Disability insurance plans fall under two categories when it comes to covering a person’s lost income: “own occupation” and “any occupation.” An “own occupation” plan will provide benefits to those who are unable to continue working under their specific job. Therefore, a person may receive benefits if they can’t perform their current job, even if it is possible for them to do a different type of job. An “any occupation” plan, on the other hand, only provides benefits if the policyholder is unable to perform any type of work whatsoever. Therefore, if a person is able to perform a different type of job, he or she may not get benefits.

There are also two types of disability insurance plans to choose from: short-term disability insurance and long-term disability insurance. In general, short-term disability insurance will grant a person benefits for around six months or less. The median amount of benefits received under a short-term disability insurance plan is 60 percent of a person’s income. Long-term disability insurance plans, on the other hand, can last either as long as a person is disabled up until the point that the person retires. It is possible to carry both short-term and long-term disability insurance.

As this shows, there are good reasons to carry disability insurance, but it is important to be aware of the fine print on one’s insurance policy. The type of policy a person holds will make a difference as to when benefits will be paid out. Those who are deciding whether to obtain a disability insurance plan should seek the help they need to understand their choices, so they can make an informed decision.

Source: Yahoo! Finance, “Two Minute Money: What is disability insurance?” Turner Cowles, June 19, 2017

Justin C Frankel

Written By:

Justin C. Frankel - Disability Insurance Attorney

Justin Frankel is a founding partner of the disability insurance law firm Frankel & Newfield and is a highly skilled litigator and advocate. He has published numerous articles on the challenges facing clients with private or individual disability insurance policies and those who own group or ERISA disability insurance policies.

Learn more about Justin | See Justin’s Publications



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