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Policy Types

Understanding how disability insurance works

Disability insurance offers a level of protection for your income. Disability insurance can ensure you will continue to receive a portion of your income and may help financially protect you and your family.

Insurance is about protecting some of your most important assets such as your home, your vehicles, jewelry, etc. But what's protecting the funds that help pay for all of these things and so much more? You know: that all-important thing called your paycheck? What would happen if you became seriously ill or injured and weren't able to work? Enter disability income insurance.

Unfortunately, disability income insurance isn't always on the forefront of many people's minds - especially when they're young and healthy. Don't think a disability will happen to you? According to the Social Security Administration, just over one in four 20 year-olds will become disabled before reaching age 67.1 Having disability insurance guarantees that you'll receive a percentage of your usual paycheck if you were to become ill or suffer a disability (as defined in your disability income policy) that prevented you from working.

Who needs disability coverage?

Most everyone who earns a paycheck could benefit from a disability insurance policy. Not sure? Then ask yourself, “How will I pay the bills if I were unable to work?” Many people assume that if they can't work, the short-term disability coverage that their employer offers will be enough. In some instances, this may very well be the case. However, what if you're unable to work for a longer period of time? According to the Society for Human Resource Management, the median length of a short term disability coverage is 26 weeks.*

Why is disability different?

One reason people may not opt for disability insurance is they think their workers' compensation coverage will cover them. If you are hurt on the job and unable to work, your employer's workers' compensation coverage will pay a portion of your wages until you are able to return to work. However, if you get injured while off the job, say on the weekend or after work, it's your disability insurance - not your workers' comp - that will help pay the bills.

Selecting a policy

Before you go shopping for disability insurance, ask yourself these questions:

  • How much money would you need on a monthly basis to support yourself and your family if your paycheck suddenly stopped?
  • When selecting an elimination period (the wait time before your benefits are paid to you), consider how long you would you be able to go without a paycheck. For example, do you have enough in your savings to go a week, two weeks, or 30 days or more?
  • How much in premium can you comfortably afford each month? It's important to note that the longer the elimination period, typically the less expensive a disability policy may be.
  • Are there any types of health issues or pre-existing conditions that may be excluded from the policy?
  • What is the income percentage of the payout for both short-term and long-term disability claims? Disability policies can differ from state to state, so be sure to ask.

Consider coverage outside of the workplace

If you have a disability insurance policy through your employer-sponsored benefits, take the time to find out what type of policy you have (short or long-term), the elimination period, and the percent of the payout. If you have a short-term policy, you may want to consider looking for long-term disability coverage outside of what your employer offers so that you're covered in the event of a long-term disability or illness.


*Length of benefits will vary depending on your policy and type of illness and/or disability.





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All Learning Center articles are general summaries that can be used when considering your financial future at various life stages. The information presented is for educational purposes and is meant to supplement other information specific to your situation. It is not intended as investment advice and does not necessarily represent the opinion of Protective or its subsidiaries.

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