What is disability insurance? This question was posed to Mark Webb, Executive Vice President, Governmental Relations, of Employers Direct Insurance Company. "Disability insurance covers a wide range of...
This question was posed to Mark Webb, Executive Vice President, Governmental Relations, of Employers Direct Insurance Company. "Disability insurance covers a wide range of government and private programs that are intended to insure against loss of income, or in certain circumstances unanticipated expenses, arising out of an injury," Webb explains. "Some programs are mandated by the state or federal government, such as workers' compensation and Social Security disability benefits. Others are offered by an individual's employer, with or without cost, and yet other forms of disability insurance are purchased from private insurers. In the case of government sponsored programs, there are usually fairly strict eligibility requirements. Workers' compensation, for example, is payable to an individual only if the injury arises out of and in the course of duties directly related to his or her employment. Social Security usually requires a severe disability that prevents the applicant from working under any circumstances. A few states, including California and New York, have state disability income programs that pay for disability that is not job related."
"For those who work for public agencies," Webb explains, "retirement systems often have a disability retirement benefit. This will pay benefits whether the injury is or is not work related. If you work for a public agency, check with them to learn the full scope of benefits that are available to you."
"Private disability programs are many and varied. One of the most basic, although not technically considered 'disability insurance', is the sick leave which is given to you by your employer. This is a form of short-term disability insurance. Short and long term disability insurance is the most common form of private disability insurance available in the marketplace. These policies provide a benefit to replace your lost net income if you are not able to return to work for a specified period of time up to certain limits. Such policies may also be available through your employer. As the name suggests, short term disability provides benefits for a period of time up to 2 years in some policies. Long term disability generally provides benefits of up to 5 years or more, or upon reaching the age of 65."
"In addition," Webb continues, "many insurers offer hospital benefit plans that pay you a specified daily, weekly, or monthly amount for time spent in the hospital. This is not health insurance because it pays you, the policyholder, rather than the hospital and is not directly related to your expenses that are incurred during your hospital stay. It is also called hospital indemnity insurance in some states. Critical illness, specified health event, or cancer policies are also available that will pay you a cash benefit if you suffer from a specified catastrophic illness or disease. These benefits may be paid in a single lump sum upon diagnosis, or upon the event, such as a heart attack or stroke."
"Another form of disability insurance is credit disability insurance. This form of disability insurance is available only in conjunction with a loan and is usually offered through a subsidiary of the lender. Credit disability insurance pays the lender, not you, if you become disabled and cannot make the installment payments on your indebtedness. You will frequently receive solicitations for this product from your credit card companies and even your mortgage company. Premiums for such policies are usually quite expensive and are financed along with the indebtedness."
