What is Disability Insurance?
Disability Insurance, often called DI or disability income insurance, or income protection, is a form of insurance that insures the beneficiary’s earned income against the risk that a disability creates a barrier for a worker to complete the core functions of their work.
For example, the worker may suffer from an inability to maintain composure in the case of psychological disorders or an injury, illness or condition that causes physical impairment or incapacity to work.
It encompasses paid sick leave, short-term disability benefits (STD), and long-term disability benefits (LTD). Statistics show that in the US a disabling accident occurs on average once every second.
In fact, Nearly 18.5% of Americans are currently living with a Disability, and 1 out of every 4 persons in the US workforce will suffer a disabling injury before retirement.
It is wise to remember that everything you do in life and acquire in life, is based on your ability to earn income.
That Protection should be a top priority.
Types of Disability Insurance
Individual Disability Insurance
Those whose employers do not provide benefits, and self-employed individuals who desire disability coverage, may purchase individual policies.
Premiums and available benefits for individual coverage vary considerably between companies, occupations, states and countries.
In general, premiums are higher for policies that provide more monthly benefits, offer benefits for longer periods of time, and start payments of benefits more quickly following a disability claim.
Premiums also tend to be higher for policies that define disability in broader terms, meaning the policy would pay benefits in a wider variety of circumstances.
High-limit Disability Insurance
High-limit disability insurance is designed to keep individual disability benefits at 65% of income regardless of income level. Coverage is typically issued supplemental to standard coverage.
With high-limit disability insurance, benefits can be anywhere from an additional $2,000 to $100,000 per month. Single policy issue and participation (individual or group long-term disability) coverage has gone up to $30,000 with some companies.
Key-person Disability Insurance
Key Person Disability Insurance provides benefits to protect a company from financial hardship that may result from the loss of a key employee due to disability.
The company can use the benefits to hire a temporary employee should the disabled employee’s disability appear to be short-term. In the case of permanent disability, benefits are used to help defray costs related to hiring a replacement, including recruitment, training, startup, loss in revenue and unfunded salary continuation costs.
Life insurance on your key personnel could also be critical based on the role they may have within your organization.
Business Overhead Expense Disability Insurance –
Business Overhead Expense (BOE) coverage reimburses a business for overhead expenses should the owner experience a disability.
Eligible benefits include: rent or mortgage payments, utilities, leasing costs, laundry/maintenance, accounting/billing and collection service fees, business insurance premiums, employee salaries, employee benefits, property tax, and other regular monthly expenses.
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