Disability Insurance Is Worth Thinking About
Are you aware that there are statistics available that indicate that over 60 percent of working Americans under the age of 65 will sustain an injury or illness that will render them unable to earn a living at some time during their working life? How will they survive if they can't bring home the bacon because of this disability? Thankfully, disability insurance that can take some of the sting out of this very real possibility is available from both private insurance companies and also from the federal government.
Disability insurance is usually intended to replace somewhere from 45-70% of your gross income if a covered medical condition prevents you from being gainfully employed. Privately issued (non-government) disability insurance policies are usually tax-free. Disability benefits from government bprograms are sometimes taxable, depending on the program and the recipient's financial status. Private programs will vary from insurer to insurer depending on the actual coverage and the premiums paid. That said, whenever comparing various private insurance programs, be sure to consider the financial rating of the company. No sense in paying premiums for years only to become disabled and find the policy issuer is insolvent and unable to pay benefits.
The definition of 'disability' varies from policy to policy, and government programs also have their own interpretation, so it's a good idea to find out ahead of time exactly how your policy defines the term. Privately issued policies usually will pay under only one of three specific types of disability. They are called 'own occupation', 'modified own occupation, and 'gainful occupation'. Own occupation disability is the most expensive type, because it will pay benefits if you cannot do your regular occupation. You can do a different type of work and still collect the benefits. Modified own occupation is the most commonly used definition. Under this definition, you collect benefits as long as you cannot perform your regular occupation and do not work at any other type of job. Finally, a gainful occupation policy only pays benefits if you can't perform any occupation that you are reasonably qualified through past work experience, education or training.
These disability insurance plans cover only medical conditions that are not job-related. There is another type of disability insurance plan that's called worker's compensation, which is designed to provide benefits to workers who suffer injuries or illnesses related to the workplace. Workers comp plans differ from state to state, but usually the state requires employers to obtain policies that meet the state's stipulations from private insurers. In the event of an employee being injured while working for an employer who has not purchased a workmans comp policy, the employee can sue the employer or file a claim against the state compensation system, and the employer will be prosecuted by the state.