Imagine tomorrow you suffer an accident that keeps you from your job for an extended period.  How would you pay your bills?  What options do you have to protect your family from mounting medical bills with no income?  Enter, disability insurance.

“More than 1 in 4 people will experience a serious medical condition or injury before reaching retirement age.” Social Security Administration.

Today, you can have that piece of mind for whatever life throws at you.  In this blog we are going to examine the different types of disability insurance for you as a business owner or just an individual that does not have coverage offered by your employer.

Short-Term Disability Insurance (STD)

Short-term disability insurance is a type of insurance that provides financial coverage to individuals who are temporarily unable to work due to a covered illness, injury, or medical condition. The coverage typically lasts for a specified period, usually a few months, and helps replace a portion of the insured individual’s income during their period of disability.

Here is how short-term disability is determined.  When a medical professional determines that an employee is unable to do their job because something changed for the employee like a surgery, accident illness, pregnancy, or mental health event amongst other things.  When an employee’s condition prevents them from working for several weeks to months.

Some Common Medical Conditions that May Qualify for Short-Term Disability:

  • Car or other major accident
  • Rehab from surgery
  • Severe illness
  • Medical procedure
  • Mental health conditions
  • Pregnancy/maternity leave
  • Injuries
  • Musculoskeletal issues

Short-term disability insurance can temporarily replace 40% to 70% of your income. It typically covers you for three to six months. It is important to understand the terms of your policy because these rates and durations can vary.  That is where the team at AUI can help you review all your options as a business owner. Or if you are an individual that isn’t offered coverage through an employer.

It is important to understand the policy that you chose. Additionally, it is important to have a team of people that can help you when questions arise.

Key Points About Short-Term Disability Insurance:

  • Coverage Duration: Short-term disability insurance usually covers a period ranging from a few weeks to a few months. Typically up to six months for short-term disability. The exact duration varies based on the policy and provider.
  • Income Replacement: This insurance provides a percentage of the insured person’s regular income. Typically  income replacement ranging from 40% to 70%, during the disability period. The amount and duration of benefits vary based on the policy terms.
  • Waiting Period (Elimination Period): There is often a waiting period after the onset of the disability during which the insured does not receive benefits. This waiting period can range from a few days to a few weeks.
  • Coverage Details: Each policy may have specific terms and conditions regarding covered conditions, exclusions, benefit amounts, and waiting periods. It is essential to thoroughly review the policy details to understand what is covered.
  • Overlap with Other Benefits: Short-term disability insurance may overlap with other benefits, such as sick leave, paid time off, workers’ compensation, or state disability benefits. It is important to understand how these different benefits interact.

What are the Most Common Short-Term Disability Claims?

According to the Integrated Benefits Institute, Health and Poverty benchmarking report released in September of 2020, these are the most common reasons why people file short-term disability claims.

The most common reasons for long-term disability claims are:

  • Musculoskeletal disorders (27.6%)
  • Cancer (15.0%)
  • Injuries such as fractures, sprains, and strains of muscles and ligaments (12.0%)
  • Mental health issues (9.3%)
  • Circulatory (heart attack, stroke) (8.2%)

 

Long-Term Disability Insurance (LTD)

Long-term disability insurance (LTD) is a type of insurance coverage that provides financial protection to individuals who are unable to work for an extended period due to a disability. Long-term disability insurance is typically equivalent to 1% to 3% of your annual income., However there are several key factors that play a role in setting the final price.

If you have a group plan through your employer, it will almost always be cheaper than coverage purchased privately, but you may want a better plan than your employer offers.  There are many reasons why individuals come to AUI to help determine the right path for their coverage.

Comprehensive Overview of LTD:

  • Purpose and Coverage: Long-term disability insurance is designed to replace a portion of the insured person’s income. Typically, if they become disabled and unable to work for an extended period. It typically covers a percentage of the person’s pre-disability income, usually around 50-70%.
  • Definition of Disability: The definition of disability varies among policies. Some policies define disability as the inability to perform the duties of one’s own occupation. While others define it as the inability to perform any occupation for which the person is reasonably qualified based on education, training, or experience.
  • Duration of Coverage: Long-term disability insurance provides benefits for an extended period. For instance, coverage lasts until the person reaches retirement age or can return to work. The specific duration of coverage and benefit amounts vary depending on the policy.
  • Waiting Period (Elimination Period): Typical policies have a waiting period, also known as the elimination period. During this time, the insured must be disabled before benefits start. Common waiting periods range from 30 to 90 days.
  • Premiums and Cost: Premiums for long-term disability insurance are based on several factors, including age, health, occupation, benefit amount, waiting period, and the definition of disability. The healthier and younger you are when you purchase the policy, the lower your premiums are likely to be.

When You File a Claim for Long-Term Disability Benefits, You’ll Usually Follow These Steps:

First you will have to see your doctor to get the appropriate paperwork filled out detailing the nature of your disability. Then you will have to file a claim and wait for the insurer to review your case to see if your disability is covered by your policy.  Finally, you will have to go through the waiting period prior to the long-term disability benefits begin kicking in.

What Are the Most Common Reasons for Long-Term Disability Claims?

The same Integrated Benefits Institute, Heath and Productivity report mentioned for short-term disability also outlined the most common reasons people file for long-term disability claims. Again, this is according to the report published in September of 2020.

  • Musculoskeletal disorders (27.6%)
  • Cancer (15.0%)
  • Injuries such as fractures, sprains, and strains of muscles and ligaments (12.0%)
  • Mental health issues (9.3%)
  • Circulatory (heart attack, stroke) (8.2%)

Group VS. Individual Disability Insurance:

Long-term disability insurance can be obtained through an employer-sponsored group plan or as an individual policy. Group plans often have more affordable premiums, but individual policies may offer more customizable coverage.

These insurances pay a monthly cash benefit if you are unable to work. LTD can be purchased individually through an agent or with a group plan via the workplace. STD is usually purchased as part of a group plan through the workplace.

Group Disability Insurance

  • This coverage is offered by employers, usually at little or no cost.
  • Unemployment waiver of premium
  • This waives your premiums while you’re unemployed, allowing you to stop paying premiums but continue owning the policy.
  • ADA Disability Income Protection Insurance Plan
  • This plan offers coverage at discounted premium rates for ADA member dentists.

What Can AUI Do to Help?

Listen, no one wants to think about a long-term injury that may affect the income that your loved ones depend on.  However, we know that 1-4 people face this very problem in their lifetime.  Disability insurance is a way for you to protect your quality of life.  Let’s face it, if you know more than 4 people chances are you have heard a story of needing his critical coverage.

The good news is you do not need to navigate this alone. If you are a business owner looking to add disability insurance to your benefits package, or a single entrepreneur working hard to protect your family, contact us. Believe it or not, it does not cost businesses or individuals a dime to leverage our talented brokers. Our team is here for you to look at all the different options and find plans that will fit within your coverage expectations.  Contact us today to learn more.