No one expects to become disabled, but a walk through a hospital ER or even a day of observation in a shopping mall can give you a quick overview of the number of people—many of them young—who are incapable of working...

Disability Income Protection Insurance FAQ's

Insurance cannot keep you from becoming disabled, but it can help prevent you from losing your home, possessions, and self-respect.

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According to Health underwriter Steve Crawford, the last statistics on the need for disability insurance coverage were collected in the 1980s. Since that time, accidents and illnesses that usually resulted in death have come head to head with technology and new medications. Consequently, the mortality rate has gone down. Conversely, however, the events that once meant death now can easily mean long term disability, yet, long term disability insurance is one of the most under-bought forms of insurance there is.

I have disability insurance on my job. Isn't that good enough?
Most major employers provide short term disability as a benefit of employment. This provides some or all of your salary if you are out with an extended illness or an accident. The assumption is that you will return to work within the specified time limit. If you do not, you will lose both your job and the disability. Some employers provide long term disability that pays a portion of your income for two to four years. A few—very few—will continue to pay until age 65 or whenever Social Security kicks in. Of course, to be eligible for this benefit, you must have worked long enough to be eligible for retirement from the company. Since very few people these days spend their entire working career at one job, it is better to have individual disability coverage.

Will a good health insurance policy take care of disability?
Health insurance pays your medical bills. It is not a "loss of income" protection. Furthermore, if you lose your job because of a disability, you may lose your health insurance as well. You can expect a significant time lapse before you would be eligible for Medicaid, but that, too, will only pay your medical bills.

Are there restrictions on how I can spend a disability check?
Since a disability check comes directly to you, you can use it to pay bills, purchase items you need, or anything else. You do not have to report the way you spend the money.

Why can't I just apply for Social Security Disability if the need arises?
Social Security is the source that most people count on to provide disability checks. Surviving on a SS disability payment will mean a significant change of lifestyle, perhaps the sale of your house, and may even lead to bankruptcy. That's because, first of all, it takes two to four years after applying before a SS disability check will start. You must be completely disabled, unable to perform any gainful employment, and you can expect to apply and be rejected up to four times. Secondly, when the payment starts, it will be based on your SS entitlement, not on your salary. Check one of the annual statements you receive from SS to see how small this payment would be.

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How much money would I receive from a disability insurance policy?
The actual payment will depend on your income. Most companies do not promise a set amount, but rather a percentage of the income you average for a period of years, usually three to five. When you purchase your policy, you decide what percentage of your income you want replaced, up to 80%. The percentage you choose, along with other features, will determine your premium.

How long would a disability income last?
The period of a disability policy depends on the contract and on the company. You want one that will last at least until you are eligible for Social Security although a three to five year policy is cheaper. A few companies have policies that will pay for a lifetime along with Social Security after you turn 65, but this is rare and expensive. In any case, look for a policy that will not expire if you have to use it, but that would allow for several periods of disability.

Will the disability payment stop if I can work part-time?
Most policies allow you to work part-time, although your payment may be adjusted accordingly. Some policies also help pay for you to be retrained on a job that you could perform under the limiting conditions of your physical problem.

Will the policy start paying as soon as I know I cannot return to work?
Most policies have a waiting period, ranging from 30 days to six months. The average is three months. Thus, you should plan your budget and save enough money to pay your bills for three months in the event of disaster. Most policies waive the premium while you are using the benefit, and some refund the first three months that you paid during the waiting period.

You should look for a policy that allows you to renew even if you have a disability or health problem. A good policy should not require two waiting periods if you develop another disability after your first one.

Can I ask for information through the mail or purchase disability insurance over the internet?
In some states, you may be able to purchase disability insurance without talking to a real person. However, disability insurance can be rather complicated. For example, your premium will be partially determined by the danger of your job. All occupations are matched to a code book. The more dangerous the job, the higher the premium. Then the percentage of income replacement, the waiting period, and the length of benefit all have to be calculated. If you don't understand the formulas, it is very easy to make a mistake. The last thing you want is to pay for something that isn't there when you need it just because you didn't take the time to talk to an agent and understand what you were getting.

Additionally, the company you work with should be financially stable with an excellent or above rating from A.M. Best, Standard and Poor, or Moody's rating services.