Individual Disability Insurance
When you say you are insured, it means that you are financially protected from unfortunate events that may happen in the future. The concept of insurance is pretty simple; anyone who wants to protect his financial interest would have to ask for someone or a company who has the capability of covering his finances. He would have to enlist for a policy that would cover him in case of mishaps. There will be periodic payments that insurance companies charge from those individual payments called premium that would ensure his coverage. The limit and the amount that the insurance companies would have to pay if certain mishaps happen would depend upon that agreed insurance policy. In cases of individual disability insurance, the coverage would depend on the person’s income.
Different insurance companies have different individual disability insurance policies. But generally, the rate would be anywhere between 45% and 60% of your total gross income on a tax free basis. Generally, there are two types of Individual disability insurance, the short term disability insurance and the long term disability insurance.
Short term disability insurance
The concept in this type of insurance is pretty easy to understand, but people are confused as to how it should be referred to because most of them think that this insurance is for disabled people. This is not; it is an insurance that covers for people’s expenses during times when they are not capable of earning on their own due to short term sickness or in cases wherein they are medically not allowed to work for a short period of time. Surgeries, accidents, and complicated ailments may happen to these folks which would mean that they wouldn’t be able to work and earn for a living, short term individual disability insurance would cover for their expenses depending on their income; the insurance could last for weeks.
There are several factors that are involved in this type of insurance. There are times when the coverage would be for accidents only or some illnesses caused by a recent event that does not include detected ailments like hypertension or diabetes. In some cases, the insurer will only reimburse your medical expenses and a portion of your salary. Sometimes, the medical expenses are not even covered. These factors would depend upon the agreed policy.
The great thing about short term individual disability insurance is that it keeps that person free from anxiety caused by lack of income during his ailment; he would be able to recover quickly without the worry about medical bills or lack of income while he’s not working. For pregnancy or work incurred accidents, there are other different insurance applicable to such cases.
Long term disability insurance
The long term disability insurance, on the other hand, is an insurance that will cover your expenses for a longer period; the period may vary according to your insurance policy. The amount that you may receive will also be computed according to the salary you are receiving when you purchased the insurance. But generally it would be about 50% to 70% of your total gross income before taxes. There are some companies that allow their employees to purchase additional premium for wider coverage.
The payout also varies in terms but the period is generally about five to ten years, some will even give you monthly salary until you reached the age of 65. There are two types of policies under individual disability insurance, the guaranteed renewable and the non-cancelable. The guaranteed renewable is when the insurance company will not be able to drop the policy as long as the premiums are paid and if no payment is skipped, the non-cancelable policy on the other hand is when the insurance company will not be able to raise the premium.
Another factor that must be considered is the residual benefits and the cost of living. The residual benefits give the difference between old and new salaries, in case that the policy owner is hired but is not earning the same income as his old one. The cost of living allows the value to increase with the inflation. And lastly, a disability policy can also be elected as own-occupation or any-occupation policy. In any-occupation policy, the insured party is required to work when he or she is capable even though not with the same working capacity as before. The own-occupation policy on the other hand allows the owner to collect the benefits of his insurance until he can resume the previous occupation.