PC-ES Disability Insurance-Print

RISK MANAGEMENT

DISABILITY INCOME INSURANCE

Determining the Need for Disability Income Insurance: How Much Is Enough?

Most people believe that they are adequately insured against disability because they think they have coverage through their employer or through the government. That’s probably why 80 percent of Americans don’t own private disability income insurance coverage. However, assuming that you’re covered against disability through your employer or through the government is a mistake. Although 50 percent of employers cover short-term disability, only 40 percent cover long-term disability. Government programs, such as Social Security and workers’ compensation, may pay you benefits, but you qualify for benefits only if you meet a strict definition of disability. Example(s): Chris worked for a major electronics company and was severely injured in a motorcycle accident on his way to work. He assumed that he was covered for disability under workers’ compensation, but his employer told him that because his accident wasn’t directly work-related, he wouldn’t be eligible for workers’ compensation disability benefits. His employer did tell him, though, that he was covered for short- term disability under the employer’s group plan, and he received those benefits for a year. At the end of that year, however, his benefits expired. Unfortunately, Chris still was not able to work and was left without income to pay his mortgage or his bills. There are many types of Disability Insurance Policies which are differentiated by how the policies define whether or not the insured individual is disabled, and therefore whether or not they are entitled to receive benefits under their disability policy. The two most common are Own Occupation and Any Occupation. TYPES OF POLICIES When you purchase disability insurance, you should pay close attention as to how the policy defines disability. Not only will the disability definition determine, in part, how much the policy will cost, but it will also determine how you can qualify for disability benefits. In general, to be considered disabled, you must be unable to work and earn income; however, many policies narrow down this definition quite a bit. They may specify whether you must try working in another occupation if you can’t do your own job, or they may pay benefits if you can do some but not all of the duties of your own occupation. Other policies aren’t concerned with occupation at all; they consider you to be disabled when, because of illness or injury, you experience a loss of earnings.

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