Disability Insurance

Financial Relief When You Can’t Work

Being unable to work due to an illness or injury won’t put the bills on hold while you recover, so disability insurance is there to help relieve financial burdens when you are too sick to work.

Different from social security disability coverage, which requires the inability to perform any type of work, five months to initiate, and is paid out at often less than half of your salary, disability coverage can pick up where social security lacks. This insurance helps by providing benefits sooner, and often a larger portion of your income is covered.

There are two basic types of disability insurance:

1. Short-term disability covers a portion of your salary for typically three to six months if unable to work due to health-related instances. Essential coverage should include temporary disability, such as pregnancy, accidental injuries, and illnesses.

2. Long-term disability covers a portion of your salary when health issues keep you from working for a period of over six months. Generally, any injury, illness, or health matter that is covered by your policy and keeps you from working longer than short-term disability would cover, is considered to be valid for long term disability benefits.

With both types, an elimination period or waiting period is required before benefits will be paid out. During that period, if you can work before the elimination period ends, you would not receive benefits. However, if you are unable to work after this period, benefit payments would begin. Elimination periods for short-term disability can range from one to fourteen days. In comparison, one month up to years can be covered depending on your long-term coverage plan.

What categorizes a disability will vary between insurance companies, with many organizations offering different types of disability insurance. Each organization and plan will have specific rules for qualifications and coverage details.

Determining Your Needs

Employers may offer both short- and long-term disability insurance as part of a benefits package, but these insurances can be purchased privately outside of employer options. Disability insurance typically covers up to 70% of your income. So, if you have a plan through your employer that covers less than 70%, it’s recommended to purchase supplemental coverage to cover the difference. However, no plans cover 100%, and supplemental insurance can only be purchased to cover up to 70% of income. It’s important to factor how long you can financially survive should you be out of work for a short or long amount of time. Pondering this will help you decide how much coverage is right for you.

Actual Cash Value (ACV) – The amount of money an insurer will pay in the event of a loss, replacement, or repair.

Annual Maximum  – The most money a dental plan pays for dental care under the terms of your policy within a 12-month benefit period. Any amount over the annual maximum is paid by the insured.

Beneficiary – Any person(s) receiving benefits provided by an insurance policy.

Bundling – Purchasing two or more insurance policies with the same company for a price discount.

Claim – A request for insurance company compensation as part of policy coverage for a covered loss.

Collision Coverage  – Insurance to repair or replace a vehicle damaged in a collision, regardless of who is at fault.

Comprehensive Coverage – Insurance protection for vehicle damages that occur in an event other than a collision. Including theft, natural disasters, vandalism, and most things not covered by collision coverage.

Co-payment – A fixed amount of payment made by a beneficiary (especially for health services) in addition to that made by an insurer.

Coverage – The protection against financial loss provided by an insurance contract for policy specific inclusions.

Deductible – A set amount of money required by you to pay towards care, damages, replacement, or repair costs before your insurance coverage kicks in to cover additional or remaining costs.

Dental health maintenance organization (DHMO) – A structured type of dental plan with provider approved dentists and services negotiated to offer reduced prices to the policyholder.

Dental indemnity plan – A dental insurance plan offering the policyholder a more personal selection of dentists and services, with insurance also paying more of the costs. This plan typically has the highest premiums.

Dental preferred provider organization (DPPO) – A dental insurance plan allowing policyholders to work with dentists that are in or out of the plan’s network, with out-of-network providers costing the policyholder more for services.

Depreciation – A decrease in the value of property (e.g., house, car, roof, water heater, etc.) due to wear and tear or becoming obsolete.

Elimination period – The time period between an injury and the receipt of benefit coverage or payments.

HMO: Health Maintenance Organization – Health Maintenance Organization (HMO). A type of health insurance plan that usually limits coverage to care from doctors who work for or contract with the HMO.

In-network  – Refers to healthcare service providers whose services are contracted with your insurance company, and services are less expensive than out-of-network providers.

Insurance Rider – A rider is an insurance policy provision that adds benefits to or amends the terms of a basic insurance policy. For an additional cost, riders provide insured parties with options such as additional coverage, or they may even restrict or limit coverage. A rider is also referred to as an insurance endorsement. It can be added to policies that cover life, homes, autos, and rental units.

Lapse – The portion of uninsured time between policies caused by the termination of a policy for non-payment or other unmet contractual requirements.

Liability Coverage – A basic level of vehicle insurance where a minimum amount of coverage is required by law.  Often set by each state individually and can vary widely.

Loss – The injury or damage sustained by the insured that the insurance company agrees to cover.

Market Value – The estimation of how much your property is worth if sold today.

Negligence – A lack of reasonable care exercised by a person/party in a given situation.

No-Fault Insurance – A type of car insurance for covering the costs of medical, hospital, and funeral expenses that result from a car accident —regardless of who is at fault.  Also called Personal Injury Protection (PIP) Insurance.

Out-of-network – Refers to healthcare service providers who do not have negotiated rates with an insurance company, with services often costing more than in-network providers.

Personal Injury Protection (PIP) Insurance – See No-Fault Insurance.

Policy – A formal contract of insurance consisting of terms, conditions, and coverage specifics.

Policy Length – Or policy duration is the length of time during which an insurance policy remains valid—ranging from months to years depending on insurance type.

Policy Owner – Person or party named in the policy, having the authority to make policy changes.

PPO: Preferred Provider Organization – A healthcare provider who has a contract with your insurance company to provide services to you at a discount.

Premium – The amount of money an insurance company charges for providing coverage.

Reinstatement – The reactivation of a policy after a lapse in coverage.

Replacement Cost Value (RCV) – Coverage paying for the replacement or repair costs to restore damaged property to pre-damaged condition.

Term – The length of time for policy coverage. Also, see policy length.

Total Loss/Totaled – Property damage determined by the insurance provider to be destroyed or exceeds the cost of repair.

Underinsured Motorist Coverage – Coverage for bodily injury or property losses caused by a motorist with coverage insufficient in covering the full amount of damage costs.

Uninsured Motorist Coverage – Similar to underinsured coverage, uninsured coverage can help pay for damages when an at-fault driver uninsured, so instead of their policy covering the costs, your policy would.

Waiting Period – A period of time an insured must wait before some or all of coverage is available. The insured may not receive benefits for claims filed during the waiting period.