The most valuable financial asset we have as humans is our ability to work and earn an income. Everything we do and plan for in life depends on the assumption that we will continue to earn a consistent paycheck. Disability insurance is a product designed to protect exactly that. If an unexpected injury or illness prevents you from working, you can still receive a paycheck to help maintain your lifestyle.
Disability insurance can be obtained in two ways: either through a group, if offered by your employer, or on an individual basis. If you have group coverage, your employer will most likely determine the coverage options and plan designs. When obtaining coverage on an individual basis however, there are many options to chose from.
First off, you need to consider whether you would prefer Long-Term or Short-Term Disability insurance. Long-Term Disability insurance is designed to protect against injuries and illnesses that can cause multiple-year or permanent disabilities. It is more expensive than Short-Term disability but will also provide a much greater potential benefit. Short-Term Disability is intended to protect against simple injuries and illnesses that normally do not cause loss of work for longer than a few months. Often it is used to provide benefits during the elimination period of a Long-Term disability policy and terminate once long-term benefits become payable.
Short-Term Disability insurance is a very popular product for individuals who are not offered it through work. It is something that many people inquire about but not very many insurance agents want to work with or even know very much about. This is primarily because the number of companies providing individual Short-Term Disability insurance is extremely limited and usually not cost-effective. There is a way however, of combining both Short-Term and Long-Term options to create a policy that can satisfy both needs. This should only be used for someone who does not want Long-Term disability but would still like to have some level of protection and at an affordable price.
A traditional Short-Term Disability policy is usually designed to begin paying benefits after 7-14 days of being disabled and will pay benefits for 3-6 months, depending on the options you choose. There is only one company I am aware of that offers this type of coverage in today's marketplace and in most cases they are not very well priced. Instead of this type of contract you can obtain a policy that begins paying benefits after a 30-day period but would continue to pay for 1, 2 or 5 years instead and for a similar price.
By obtaining a policy structured in this way, it is still protecting you on a short-term level since benefits are payable after only 30 days, but will also protect you from a longer-term disability as well. The average Disability claim will last 2.5 years. Although the risk you run in not owning a Long-Term disability plan that would pay benefits to retirement age is very high, having a policy that pays benefits for 2 or 5 years will at least provide you with protection covering the average length of a claim. Although it is not the same as having a Long-Term Disability policy, it is better than not having any coverage at all.
There are multiple highly rated insurance companies that can be used to create this type of policy design. Since this design would technically be created using a Long-Term Disability contract, you will have access to very important policy riders that can enhance your coverage as well. If you are interested in reviewing options relevant to your circumstances, please speak with a Disability insurance specialist, not just any insurance agent. Disability insurance is a very detailed type of coverage and you want to be sure the person you work with can truly provide you with all of the best options.