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How Does Disability Insurance Work?

How Does Disability Insurance WorkInsurance is a hot topic these days, particularly when it relates to health. Naturally, with recent events, health insurance tops the list when it comes to heated discussion regarding insurance. But because it relates to health issues, disability insurance is just as important. The problem is that, though most of us are quite diligent about our health insurance, we know next to nothing about disability insurance. And most of us don’t even have it. So what is disability insurance? How does it work? Is disability insurance for executives a necessary part of business? And is it really all that necessary for any of us to have disability insurance, even if we don’t consider ourselves disabled in any way? Following are answers to these and other important questions about how disability insurance works and why it’s important.

What is disability insurance?

Perhaps a better term for disability insurance is ‘income insurance.’ If you find yourself unable to work because you have a disability, disability insurance is a means of insuring your income so that you can go on providing for yourself and your family. You’ll receive an income regardless of the fact that you’re unable to work. The difference between disability insurance and workers’ compensation insurance is that your illness or injury does not have to be work-related in order for you to collect on your disability insurance.

What is considered a disability?

The specifics regarding the definition of a disability will vary from one policy to the next. The major question in determining whether you are considered ‘disabled’ is if you are unable to perform the duties associated with the job you currently occupy, or if you are unable to perform the duties associated with any job. The best thing to do is to speak with an agent and get the details of any policies you’re considering purchasing.

What will disability insurance mean to me and my family?

disability coverage
No matter what your occupation, disability insurance will be beneficial to you. As an executive, however, your likely six-figure income will need serious replacing if you are unable to perform your job. Unfortunately, disability insurance experts agree that disability insurance tops the list of most ignored coverages available. Sadly, it’s one of the most vital types of coverage around because it insures your income—it insures that you’re still able to collect a paycheck even if you become disabled, whether short-term or long-term.

What are the types of disability coverage?

There are two main types of disability coverage—short-term insurance and long-term insurance. Each type of policy provides specific coverage guidelines that you need to become familiar with before purchasing any disability insurance policy. There are also supplemental-type coverages that relate to different types of disability insurance. Again, consult with an agent and be sure to get the specifics of any and all policies you consider purchasing.

How much coverage do I need?

How much coverage you need depends on your current position, your income, and how closely you need to cover and replace your current lifestyle. If you’re an executive with a middle-to-higher income, you will need to look at disability insurance policies whose coverages allow for such a lifestyle to be maintained.

How will I collect if I need it?

Most disability insurance policies pay out on a recurring basis, typically monthly. The amount of each payment and the number of payments monthly will depend upon the policy you purchase. It’s important to note that disability insurance will not allow you to purchase a policy that exceeds your current salary. Riders are available that will increase the amount of the payout yearly in order to account for such factors as inflation and earnings increases.

Like all types of insurance, disability insurance is about security. It’s about still being able to take care of yourself and your family in the event that you are disabled. Both short-term and long-term disability afford you the ability to continue paying your bills—your mortgage or rent, your car payments, your insurance, utilities, food, etc.—while you’re unable to work and collect an income from work. Disability insurance for executives can be a vital component of protecting their lifestyles. In fact, for those whose families or even businesses depend upon their being able to work, disability insurance is more of a necessity than a suggestion.