Understanding Disability Coverage

What Is Disability Insurance?

Disability insurance is a type of insurance that provides you with a portion of your salary if you become disabled so that you are unable to work. You usually have small amount of disability coverage on the job; it is also a good idea to you’re your own individual disability policy with a private company.
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What is the difference between long term and short term disability?Discussing Short Term Disability

Short term disability is basically sick leave. If you are out of work for a week or two, your employer may continue to pay a salary. However, it is not coming out of his payroll budget, but from the short term disability that he provides as a benefit on the job.

Long term disability is also a replacement of your salary, but for a longer time period which could be anywhere from a couple of months to two years. A very few employers will continue long term disability until you turn 65 or qualify for Social Security disability. If you are completely disabled, it still often takes at least two years to qualify for SSI. Thus your disability insurance on the job can provide you with at least part of your salary.

What does Social Security Disability do?

Social Security Disability is provided by the government when a person is unable to perform any kind of work for pay. You usually must be completely and permanently disabled. Applying and qualifying for SSI is a one to two year process with the average person having to appeal four times before being granted the disability. Then you receive approximately the same amount of money per month that you would receive if you were old enough to begin collecting Social Security. Often the benefit puts you well below the federal poverty level, but if you even work part time, you will lose it.

Do I really need an individual disability policy?

If you want an income that will allow you to keep paying your mortgage or providing for your family whether you qualify for SSI or not, you want disability insurance. National statistics tell us that if you are under the age of 40, you are much more likely to become disabled than you are to die. People who become disabled at an early age often face a lifetime of privation, embarrassment, and sometimes even homelessness. Knowing that you will have an income if an unforeseen illness or accident happens to you will give you and your family peace of mind.

If other people like your spouse, your children, or your parents are depending upon you as a breadwinner, then your disability can affect their lives in many tragic ways. Your children may have to give up their dreams of completing high school or college; your spouse may have to work full-time even though you'll need care at home. Many families have had to sell their homes or declare bankruptcy after a breadwinner becomes disabled.

Will mortgage disability accomplish the same thing as private disability insurance?

Mortgage disability is a type of insurance that pays the bank if you should become disabled and unable to earn enough money to pay your mortgage. You pay a premium for the policy, but the bank collects the benefit. This type of insurance, depending on the exact terms, may keep you from losing your home, but it will not provide you with an income for your remaining bills.

How long does it take to begin collecting benefits under a disability policy?

That depends on the terms of your contract, but most disability insurance policies do have a waiting period of 30 to 90 days. Taking a longer waiting period lowers your premium, but it is important to have enough money in savings to be able to pay your bills for several months while waiting for the disability benefits to begin.

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