Some health issues and injuries can leave you disabled and unable to work for long. Unfortunately, most of us don’t prepare for this. So when it happens, it comes as a huge surprise.
The Council of Disability Awareness claims that many people will experience some form of disability before they retire. Bear in mind that as we age, we have chances of getting disabled because of an illness or accident. Sadly, disability isn’t something that you can control. But, you can protect yourself by taking disability insurance. Learn more about this insurance type and why you need it from this guide on this website https://www.ocbc.com/personal-banking/insurance/great-careshield.
What Does Disability Insurance Mean?
It’s insurance that protects you if you get into an accident or an illness that hinders you from working. Young people have a better chance of qualifying for a policy. However, as an individual becomes older, their premiums increase, and if their health deteriorates, finding an affordable policy can be a nightmare.
The insured person receives the benefits directly, which allows them to cover their expenses immediately. Although policies vary, most cover a huge percentage of your income.
Types of Disability Insurance?
Disability insurance is of two types: short-term and long-term. Both help replace your monthly salary only that one is for a short period and the other offers coverage for a long period.
Long-term insurance is issued for two years up until retirement, but you can extend it. It covers 40-60% of your salary. However, some policies can cover 60-70% of your income. The amount paid out per year is 1-3% of your income, and you usually start receiving benefits around 3-6 months after your disability is confirmed. Long-term disability insurance is suitable for someone who solely relies on their income and doesn’t have savings.
On the other hand, short-term insurance covers about 60-70% of your salary and usually lasts between 3-6 months. However, it can be longer depending on the policy you have. It also covers 1-3% of your income, but it is usually expensive compared to long-term coverage. You receive your benefits around two weeks after your disability is confirmed. Short-term insurance is suitable for those whose employers offer short-term coverage. There is also a disability insurance provided by governments like the NDIS plans in Australia. However, this only applies to PWDs who need assistance in their day-to-day activities. Thus, this category should not be confused with the types as mentioned earlier.
How Much is a Disability Insurance Cover?
Disability premiums for short and long-term coverage range from 1-3% of one’s yearly income. For someone who earns $100,000 a year, that would be $1000-$3000 annually. However, long-term coverage is usually cheaper. It’s advisable to buy a “non-cancelable” policy which the insurer cannot cancel even if your health goes south.
Aside from the type of insurance you pick, other factors influencing your premiums include age, occupation, income, and lifestyle habits.
What is and isn’t Covered by Disability Insurance?
Disability insurance generally covers your lifestyle. That is your monthly expenses like health care, mortgage, daycare, etc. It caters to the expenses that your income would have otherwise covered.
But please note that this insurance only covers a portion of your income. So, extra expenses like medical bills aren’t covered. Also, note that most long-term policies do not cover pregnancy. But complications beyond childbirth may be catered for in some policies if you had purchased the coverage before getting pregnant.
Do You Need a Disability Insurance Cover?
Yes. Every person needs disability insurance regardless of their job industry. Often, we think disability is something that can happen to some people. However, anyone can get disabled, especially those working with heavy equipment or machinery.
But individuals in some professions like police officers, firefighters, or shark handlers are offered higher premiums on this insurance than other people because their job puts them at high risk of getting injured and developing a disability.
Thankfully, many employers offer disability insurance. But, please bear in mind that this cover isn’t designed to make you rich. Instead, it’ll cater to your bills and put food on the table.