Long Term Disability Insurance

Quite a few people live with pre-existing health conditions which could lead to disabilities and the ability to hold down a job.  Long term disability insurance is the solution that people can take advantage of – to ensure that they have an income when it is needed the most.

Disability insurance is a means to ensure that a person has a steady source of income in case they have a serious health condition and unable to work.  Group plans offered by employers will ensure that 60% of the salary is available.  With the help of individual policies and supplemental plans, a person can have up to 80% of income. Benefits are available for a maximum of 5 years or until one retires.  If a person buys this coverage on his own, then the benefits are tax free.

What to Expect:

Policies and benefits can vary quite a bit – it pays to read and understand the clauses and exclusions well.  People who really need the help may find that they have missed some important clauses, making the policies worthless.  Cheaper plans end up with too many restrictions and make it difficult to claim benefits for a long time.  Here is a look at the different disability plans available to people – it is usually advised that individuals purchase insurance on their own as well to ensure that they are covered for all eventualities.

Group Plans: Employers may offer disability insurance – most of which last for 5 years.  These plans usually have to be supplemented by other sources – the coverage may not be quite 60%.  A person’s regular salary is the only amount covered – bonuses don’t figure into the equation at all.  These policies will also restrict the amount of time benefits are paid, after which the onus is on employees to prove their disability.

Individual Plans: Experts recommend purchasing an individual plan, regardless of whether one is covered by their employer.  This will ensure an extra 10-20% extra in income.

That explained; let’s look at short term and long term disability insurance.

  • Short term insurance covers situations like injuries, illness or even pregnancy.  Coverage is available for up to a year and the amount of time depends on the number of years worked.  Short term disability is mandatory in some states – the amount of time varies from state to state.
  • Long term disability usually kicks in once short term benefits are done.  This is not mandated by states – so it is entirely up to employers to offer it to their employees.  About half of all companies offer this to their employees. 

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