As a disability insurance holder, its possible to gain a certain measure of relief in the event of an incident that limits your ability to earn an income.
The United States allows its workforce to seek disability insurance either privately through an insurer or publicly through the government’s Social Security program.
Nevertheless, it's not the most straightforward process to secure proper and beneficial disability insurance, especially with the options available.
Speaking with an experienced financial advisor can help you evaluate your personal situation. Feel free to contact us at The Kelley Financial Group at (412) 528-1920 to start the discussion.
Understanding Disability Insurance
Insurance offerings, as you may know, are designed to provide you with a measure of protection if a covered incident should occur. Put simply, your disability insurance policy is meant to compensate you for the lost income a disability introduces.
Considering eligibility requirements must be met before it becomes possible to receive payments, the lines may be a bit more blurred where private lenders are concerned. The US Social Security program is quite adamant on definitive proof that a disability has been introduced that prevents working.
Note that this does not refer only to whatever career or type of work you had before. Your disability needs to prevent you from securing any kind of gainful employment at all for you to qualify.
Who Is It Recommended for?
It usually helps though consider how living expenses are taken care of. Many people have a job as a source of income but do not necessarily depend on it to cover their expenses.
However, should you not fall into that category because you are indeed dependent on your salary or wage to take care of your financial needs, then disability insurance may be a good idea for you.
It does not cover the entirety of the salary that you would have been earning while at work, but at least the partial payments allow you to continue to take care of your responsibilities effectively.
The Disability Classification
Each provider has a definition of what constitutes a disability, with some opting to provide individual definitions of each type of disability that is covered, eliminating any ambiguity.
Regardless of whatever unfortunate event you may suffer that would necessitate an insurance claim, you cannot access the benefit of your policy if what you are experiencing is not aligned with the formal definition.
Types of Disability Insurance
Disability insurance can come in the form of individual or group policies, which are all covered below.
If you are interested in this insurance type and you don't currently have such a benefit through a company, then it's very likely that you may take out an individual policy instead.
Even some people who are employed and covered by a group policy choose to take out an individual one, as they are high earners, and they want to ensure that even their partial payments are enough to sustain them if they should suffer a disability. It can be beneficial to obtain an Individual policy before obtaining group disability. This could potentially allow an individual to replace a higher percentage of income lost from disability.
This is the employer-based variation of disability insurance. Depending on your place of employment, you will either cover a subsidized amount of the premium, or your workplace will cover the entire premium.
Though some companies do not directly offer it, they do allow you to purchase it through them, which makes it more of a voluntary benefit.
It is advantageous to do this instead of just buying an individual policy, as purchasing coverage through an employer yields the benefit of paying a group rate premium, which is often lower than the individual one.
Long-term Vs. Short-term Policies
Short-term disability insurance policies tend to have a nonexistent waiting period or an incredibly short one at the very least. In most cases, you can immediately access the benefits if a tragedy should strike.
However, the maximum benefit also does not go on for a particularly long time. You may find that your short-term disability policy only carries on for about two years.
On the other hand, a long-term disability policy has a longer wait period before you're eligible to start receiving any benefits. This can range from weeks to months.
However, the benefits that you can access with a longer-range policy give a greater coverage window, offering a maximum benefit period that can range anywhere from a few years to the rest of your life.
How to Gauge the Amount of Insurance Needed
How do you decide how much insurance you need? It's essential to remember that your income should always be a guide, as should the number of living expenses you have.
Generally, the process involves scaling the amount you would need, ensuring that you have one or more policies covering that, and at least leaving a bit of breathing room. In most cases, you aren't going to be paid more than 40% to 60% of your pre-disability salary.
Beyond these factors, there are a couple more very essential ones to bear in mind, which is one of the elements that make proper financial planning non-negotiable.
First, you often find that you are progressively paid more the longer your coverage window is. This is on the more positive side of the spectrum.
The worrisome side of things is that some professions have a coverage time limit. For example, if you're an office worker, a policy is generally not going to cover you past 65 years old, which would have been your retirement age.
Disability Insurance Financial Advice in Pittsburgh, PA
The explanation of disability insurance provided above may be a bit of an oversimplification. While securing a policy is relatively straightforward, it doesn't mean that you are buying into the right one.
A financial advisor can help you evaluate your options. Reach out to the Kelley Financial Group today at (412) 528-1920 to get the conversation started, so you can confidently choose the right insurance package for your unique needs.
This material was prepared for The Kelley Financial Group’s use.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.
This article is intended to assist in educating you about insurance generally and not to provide personal service. They may not take into account your personal characteristics such as budget, assets, risk tolerance, family situation or activities which may affect the type of insurance that would be right for you. In addition, state insurance laws and insurance underwriting rules may affect available coverage and its costs. Guarantees are based on the claims paying ability of the issuing company. If you need more information or would like personal advice you should consult an insurance professional.