What Is Disability Insurance?
Disability insurance provides financial security for your family if you become unable to work due to disability. If sickness or injury causes you to stop working, disability insurance will replace part of your income.
Who Needs Disability Insurance?
Disability insurance is important for anyone who depends on earning a regular income. If you don’t have enough savings to cover your living expenses from now until you die, you need disability insurance. It doesn’t matter whether you have kids or whether you are married or single. Even if the only person you are supporting financially is yourself, you still need to think about how you would cope if you became disabled.
Types of Disability Insurance We Cover
Group disability insurance covers a group of people, such as employees working for a particular company. Typically, the employer would be the policyholder, while individual employees would receive certificates of coverage. The employer manages the policy and collects premiums from the insured people, often through payroll deduction. This kind of policy is very convenient for most workers, but if you leave your job you will no longer be covered.
Individual disability insurance is a policy that you apply for as an individual. You pay premiums directly to the insurer and receive coverage that protects you even if you change careers. Individual disability insurance is very flexible, but it can cost more than group disability insurance.
Supplemental disability insurance is a top-up for group disability insurance provided by your insurance. Typically, group disability insurance policies provided by employers covers between 40 and 60 percent of your salary, which is nowhere near enough for some families. You can top up the benefits you receive after becoming disabled by taking out a supplemental disability insurance policy. This kind of policy belongs to you as an individual and applies even if you change jobs.
Short-term disability insurance only covers you for a short period. It can be very useful if you are injured and need to take time off work to recover, but it won’t keep paying out forever.