What Does Disability Insurance Cover?
One of the most powerful fears modern people face is finding themselves unable to work and provide for their families. If a disability or debilitating illness prevents a person from working, they won’t be able to go to work as normal and continue bringing in their paychecks. To combat this, special aid systems like disability insurance have been put into place to help supplement a person’s income if they are no longer able to work.
Disability insurance comes in many different forms to help cover a plethora of conditions and illnesses. It can assist individuals over short-term stints or long-term periods depending on your coverage type, but they are all united by several common factors.
Let’s take a closer look at what disability insurance is before diving into the similarities between policy types and the differences between long-term and short-term coverage.
What is Disability Insurance?
Disability insurance is a specific kind of insurance that helps offset costs accrued when an individual is disabled and can no longer work. Unlike worker’s compensation insurance, it provides covered employees with partial wage replacement if they become ill or disabled even off of the clock.
It must be noted that while disability insurance can help individuals recover part of their lost wages, it cannot replace the entirety of their paycheck. Instead, it will typically replace approximately 60% of lost earnings in monthly payments.
Features of All Disability Policies
While disability insurance types and categories don’t always cover the same things, they do all have the same basic features that help individuals understand what they may qualify for, how much coverage they can receive, their premiums, and what has to happen before they can collect insurance payouts.
Each policy must have a premium–the monthly amount that must be paid either by the employee or employer to maintain coverage. Benefits are another key factor in disability policies. An employee’s benefit is the amount they will receive each month they’re out of work. With disability insurance, this can range from fifty to eighty percent of their total paycheck.
The benefits a person receives can only extend through a very specific time known as the “Benefits Period.” This period may be a handful of months if you have short-term coverage options or may last until the covered individual is retiring with long-term coverage. Additionally, there may also be a waiting or “elimination” period that denotes how much time must pass after an individual is disabled before they may collect benefits.
Categories of Disability Coverage
There are two specific categories of disability insurance that a person may be eligible for: short-term coverage and long-term coverage. Each works in very distinct ways, so it’s important to understand each option so you can choose what works best for you.
Short-term coverage, as its name suggests, is a coverage type that is designed to replace an individual’s income for a shorter period of time. Usually, it comes as part of a group insurance plan through an individual’s employer, and they work to pay out benefits for anywhere from three to six months in total with few plans reaching as many as twelve months. Additionally, these policy types typically have an elimination period of two weeks.
Covered Conditions and Illnesses
Any short-term illnesses or injuries that keep you out of work will likely be covered by this policy type. The most common use of this insurance type is to help offset costs while an individual is on maternity leave covering six weeks after a normal pregnancy and eight weeks after a cesarean section.
Additionally, any medically necessary surgical procedures will likely be permitted for coverage on short-term disability policies along with organ donations and bariatric weight-loss surgeries. Surgeries that are purely cosmetic may not be covered.
Unlike short-term coverage, long-term disability coverage is designed to last much longer, even taking a person through retirement if needs be. Also, they usually don’t come in group plan formats. They are most often purchased as individual insurance policies by those who have greater concerns for their families and lifestyles should a disability keep them from working normally. Additionally, these policies have an elimination period of at least six months, possibly more depending on the policy type and provider.
Covered Conditions and Illnesses
The most common things covered under disability insurance are not accident-related. Instead, they tend to be illness-based. The top illnesses covered by long-term disability include cancer, tumors, cardiovascular and circulatory diseases, muscle, back, and joint disorders, and spine and nervous-system-related disorders.
Injury-related conditions commonly covered under long-term disability include accidents, injuries, and poisonings.
Employee Benefits Made Easy
At Beckham Insurance Group, our knowledgeable and experienced employee benefits representatives are here to help make your benefits administration as easy and stress-free as possible. Contact us today to learn more about how we can help you build a competitive and comprehensive benefits program.