Disability insurance is a type of insurance that provides financial support to individuals who are unable to work due to a legitimate medical disability, as confirmed by a doctor. The amount of coverage provided by disability insurance typically ranges from 50 to 70 percent of an individual's salary.
There are two main types of disability insurance: short-term and long-term. Short-term disability insurance covers an individual who is unable to work for a period of time due to an illness or injury, usually for a period of no more than one year. Long-term disability insurance is generally provided for individuals with severe injuries or illnesses that prevent them from working for several years or even for the rest of their lives.
Many employers offer short-term and long-term disability insurance to their employees, but these benefits are taxed. It is generally more affordable to participate in employer group rate disability insurance than to purchase individual disability insurance, which is purchased directly from an insurer and is tax-free.
The cost of coverage is determined by a person's overall health, occupation, age, sex, and hobbies. Some insurance companies may require a physical to determine the individual's state of health, and they may refuse to write policies for individuals with certain illnesses or chronic conditions.
When considering an individual disability insurance policy, it is important to consider the type of coverage you need (short-term versus long-term), the coverage offered by your employer, and the wait period to receive benefits. It is also recommended to choose a non-cancelable policy over one that can be cancelled, and to opt for return to work disability insurance provision, which provides medical benefits even if the individual has returned to work.