Disability Insurance: Things You Need To Know

Disability Insurance: Everything You Need To Know

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Disability insurance or DI is an insurance policy that provides an individual coverage in case a sickness or injury prevents him/her from working and earning income. This article brings to life varied aspects you need to know about disability insurance.

In the event of acquiring an injury or illness an individual maybe temporarily or permanently out of work. When your potential to earn comes to a halt, life gets complicated. Your savings get exhausted on expenses that arise, and frustration sets in. You don’t have to face this scenario if you have disability insurance. Disability insurance is a coverage that is offered to safeguard your interests in case a sickness or injury prevents you from earning income.

When equipped with DI your insurance company provides you with coverage in the event of sickness or injury. The benefits provided are in accordance with the type of short term or long term disability insurance you purchase.

Rates charged on premiums differ in accordance with the insurance company and different types of DI. The type of disability insurance and the designation/occupation of the individual also determine the rate charged on premiums.

The policies and regulations that govern disability insurance coverage differ in accordance with different countries. Individuals exposed to high risk jobs are charged a high premium on DI coverage. For instance, a skilled machine operator is at greater risk of being injured than an employee working on a computer in office. As there is a greater risk of injury to the machine operator, he/she will be charged a higher premium. Organizations whose employees work in a secure environment pay lower premiums on coverage as the risk involving injury to its employees is low.

As the chances of acquiring injuries on high risk jobs are significant, employers make it a point to safeguard their employees by providing them with disability insurance. The type of disability insurance plan differs among different companies/organizations. Some organizations may device policies that include disability insurance with workers compensation while many others may include DI separately. In some organizations workers compensation, health insurance, and disability insurance maybe combined in one policy.

Although a small organization may avail of a common disability insurance policy for their employees, big firms or organizations may provide a disability insurance policy to their employees in accordance with designation. If individuals working for an organization feel that the disability coverage provided by the employer is not adequate, they can purchase additional coverage either from the company managing their existing policies or from another insurance company.  

Most employees that decide to purchase additional coverage prefer to do so from their existing company as they are entitled to discounts and lower rates on premiums. Employers receive a sizable discount from insurance companies as they make bulk purchases for their employees. Individuals that are not provided disability insurance coverage by their employer, or who are self employed can purchase DI from numerous insurance companies providing services.

Premium Rates Charged on Disability Insurance

A premium is the payment made buy the insured to the insurance company. The premium charged on disability insurance depends on a number of factors such as occupation of the individual, type of policy, medical history of the individual, and job risk of individual. The rate of premium depends on the benefits offered on the policy. Occupation of the individual prompts the rate of premium charged by insurer. Typically, the rates charged are high if the type of coverage offers varied benefits. The premium is high if the payout on the policy starts immediately and lasts for a long duration.

Companies offering disability insurance take into consideration the medical history of an individual. If medical reports suggest that an individual is prone to a particular type of sickness, or falls ill too often, the premium fixed by the insurance company will be high. On short term policies the premium charged is low as payouts for claims begin gradually.

Government Aided Disability Insurance Programs

Government aided programs in developed countries provide a basic form of disability insurance to its citizens. In the United States, programs such as SSI (Supplemental Security Income) and SSDI (Social Security Disability Insurance) which are included under SS (Social Security) have proven extremely beneficial. The criteria of these programs are to provide basic coverage for individuals that are underinsured or uninsured.  

Types of Disability Insurance Plans

Business Overhead Expense Disability Insurance

BOE (Business Overhead Expense) is a type of coverage that may be purchased by the owner of a business. Under this type of policy the overhead expenses of a business are reimbursed by the insurance company in the event of the owner of the business acquiring a permanent disability.

Key Individual Disability Insurance

Companies can get coverage on Key Individual disability plans. Under this plan a company is compensated for the hardships it may face in the event that a key employee is unable to work because of a disability. The benefits that are received through this plan can be utilized by the company to hire a skilled employee to temporarily replace their key employee recovering from the disability. If the key employee of the company suffers a permanent disability and is unable to work, the benefits of this policy may be used for hiring, training, recruiting and start up costs.

Individual Disability Insurance

Those individuals whose employers do not provide disability insurance or individuals that are self employed can purchase DI from insurance companies. Rates on disability insurance differ in accordance with…

  • Occupation
  • State
  • Country

High Limit Disability Insurance

This type of insurance policy is designed to keep individual disability benefits at 65% of income regardless of income slab. High rate on premiums are charged on this type of policy. High income earners pay high premiums for high limit disability plans to ensure that coverage benefits include most major scenarios related to injury or illness. Individuals that earn a high income often opt for high limit disability insurance as this type of coverage offers exceedingly high monthly benefits.

If you are a professional management looking after the welfare of sports professionals, it is recommended that you purchase a high limit disability policy. This type of disability coverage ensures that the payouts are immediate, and for a long duration.

The claims made to the insurance company should be in accordance with the type of disability policy you own. Make sure you compare the benefits and rates different insurance companies offer before you purchase disability insurance coverage. Reading the documentation and terms of policy is extremely important before you sign up for a DI policy.


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  • goldstay  08-11-2017
    The best part of this article is when you said that clients should be able to compare the benefits and rates of insurance companies. Aside from that, insurance agents should also be able to assure their clients have completely understood the terms and conditions of what they're applying for. Otherwise, there would be problems in the future in case the client would demand for a claim. Clients should make sure to ask and ask questions before closing the deal. Thank you for sharing.
    reply 1
    • realityspeaks  13-11-2017
      Yes, before availing of disability insurance it is important we have a clear perspective on terms and conditions and claim scenarios. And the only way to get to know different perspective is by asking the insurance advisor questions that weigh on the mind.
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