Disability Insurance 101 the crash course

When most people think about getting covered with insurance, the first thing that comes to mind are life and health insurance. People rarely ever think about disability insurance. Ironically, you’re more likely to need disability insurance than life insurance.

So what is disability insurance?

The idea behind disability insurance is basically to compensate for loss of income when a person is no longer able to work. If for some reason you get injured in an accident or suffer from a prolonged sickness, this type of insurance will cover the income you’re no longer able to earn.

Why is it important?

Think about it, there’s car insurance and house insurance for if you get into an accident or if your house get damaged. Doesn’t it make sense that you have insurance in the event you get damaged? Insurance policies see to it that these things are repaired or replaced. If you get injured or seriously ill to the point where you can’t work anymore work, this can have a serious impact on your finances if you don’t have insurance. How long will you last without money? Even if you had some money saved, it’s only going to last for so long.

You may need an Individual Plan to cover your income or on your Group Employee Benefits plan through your work. You should know what you’re covered for whether it’s an Illness, an Injury at work or not at work.

Individual Plans; full plan or top-up to Group Employee Benefits:

Injury Only – Guaranteed Issue Plans… There is no underwriting needed, you automatically qualify. This plan is only dependent on your Annual Income and what you qualify for a monthly benefit.

Illness option… You can add illness coverage onto your injury only plan, this is underwritten, but you will have cost effective coverage in one plan.

Professional plans… There are also fully underwritten Disability plans that automatically include injury and illness coverage together.

There are two types of disability insurance coverage that may be included in your Group Employee Benefits:

  1. Short Term, and/or;
  2. Long Term.

Short Term Disability Insurance Coverage

Generally, you get benefits with these policies for about six months to a year. They usually have a pay out after a grace period of 7 days. Most companies offer these sort of policies to their employees.

Long Term Disability Insurance Coverage

Like the name suggests, these plans insure disability over a long period and in some cases even for the rest of your life. However, with these policies the grace period isn’t a grace period at all because the wait can be anywhere between 30 days to age 65 years. It usually comes after the end of a short term coverage. There are some companies who offer longer term policies as an option to their employees as well.