What is Disability Insurance?
Disability Insurance is also known as DI or in other terms disability income insurance. This form of insurance provides the beneficiary a security to his or her earned income. The insurance of earned income is for the purpose of the possibility or the risk of disability that may happen. In case of an event where the beneficiary gets disabled, the insurance provides disability benefits such as paid sick leave, short and long-term disability benefits. In the United States, statistics show that there is a disabling accident happening every second. Therefore, disability insurance is certainly necessary.
There are several types of disability insurance and each offer different benefit package. A person might want to determine his or her needs in choosing the right type of disability insurance. However, employers usually offer or provide disability insurance to their employees. On the other hand, if an employer offers no such insurance, the employee may voluntarily pay for his or her own policies.
Individual disability insurance is designed for those people who are under an employer that does not provide insurance benefits. Moreover, this type of insurance is also available for those who are self-employed. Premiums may vary depending on the coverage and different companies offering the insurance.
There are several factors affecting the cost of premium. The State or country is one factor, policies that provide higher monthly disability benefits are costlier, and the same goes for policies that were paid for a longer period of time. Consulting an experienced insurance broker is necessary since more often than not, cheaper policy at purchase time can be more expensive when claim time comes.
High limit disability insurance keeps individual benefits at 65% of income regardless of income levels. This is designed to limit the benefits of high income earners. High limit disability insurance benefits may range from $2,000-$100,000 dollars of benefits per month.
Key person disability insurance is designed for a company so that it will not suffer financial hardship in the event that the key person gets disabled. This disability insurance provides the company a cash flow in case of a key person loss. The cash flow is designed to help the company keep on its ongoing operation to prevent profit loss.
Business overhead expense or BOE is a type of disability insurance provides protection for a business in the event that its owner gets disabled. This insurance provides reimbursement for overhead expenses.
National insurance programs are usually the typical social security programs being given by the government of a country. This type of insurance is more commonly offered by most employers. Generally, these social security programs give a not so large benefits but enough just to prevent dismal poverty.
Employer- supplied disability insurance is, as stated in its name, a type of disability insurance being given by employers. This type of insurance is actually the second most important form of insurance for employees. The most common reason of people getting disabled is mostly job-related. The range of coverage depends on how much can an employer offer. Other policies being offered by employer are sometimes designed to compensate workers in the event of temporary disability even if the cause is not job-related.