Individual Long-term Disability Insurance

Most companies offer group disability insurance. If your company offers one, you’re one of the lucky few. Nowadays, it is more difficult to find a company that offers all the coverage that you need. Only a third of private industry workers have access to employee-sponsored disability insurance. According to the U.S. Census Bureau, one in five employees under the age of 65 have a chance of becoming disabled. This is the main reason why workers often purchase their personal individual long-term disability insurance.

Individual long-term disability insurance is an important safety precaution to have. Without this, if an accident or injury occurs at any time and you cannot go back to work, you would have lost your income for the time you took off work. Even if you have a worker’s compensation, this will only cover any injury or accidents that occurred while you were at work, but fewer than 5% of injuries or accidents are work-related. This means, that if you had a car accident outside of work and cannot go to work, you will not receive any salary if you took off work. Individual long term disability insurance can assure you that you have a monthly income replacement. The benefit payout you will receive can be used towards your own choosing such as car payment, mortgage, groceries, and other payments and expenses you may have.

Individual long-term disability insurance is an insurance policy that protects an employee from loss of income in the occasion that she or he cannot work due to illness, injury, or accident for a long period of time. This assures an employee that he or she will receive a percentage of their income. When you have individual long term disability insurance, and get into an accident or injury, or get sick, you can claim your benefits provided that you cannot work due to the illness, injury or accident. Individual long term disability payments may replace or buffer your salary, usually at 50% – 70% of your income. If an employee purchases disability insurance from their employer, the payment is subjected to income taxes, while those who purchase individual long term disability insurance from an insurance agent are usually tax-free.

There are two kinds of disability that are under consideration when you claim your individual long term disability insurance. Partial benefit is for any employee who qualified for total disability but is able to work in a reduced workload. The benefit is payable if the loss of income due to injury, illness, or accident exceeds a specific percentage, usually around 15 to 20 per cent. This means that the benefit payout depends on the percentage of an individual’s loss of income. A residual benefit payout is payable at a specific percentage of insured earnings if an individual loses a source of income because their disability prevents them from being fully employed. Again, benefit is calculated according to a specific percentage of pre-disability total income.

An individual long-term disability insurance typically consists of 4 qualities. One is that benefits are payable after an expiration of a qualifying period where an employee usually received benefits under a salary continuance plan, a short-term disability insurance, or employment insurance. Qualifying periods are shorter period of time, typically around seven days, where an injury or accident does not limit an employee from working for more than a week.  Another is that the definition of disability depends on the employee’s ability to perform their own job or any job. Disability that limits an individual from working his or her “own occupation” is a scenario where an employee is considered totally physically or mentally disabled that it prevents them from performing the daily duties of their own specific occupation. Disability that limits an individual from working “any occupation” means that the employee is totally physically and mentally disabled from performing the daily duties of any occupation for which they are suited or qualified for based on experience, training, and education. A recurrent disability can be added to your individual long-term disability insurance, where the policy takes into consideration the event where an individual tried to go back to work, but due to the recurrence of the disability, is unable to properly perform their regular duties. Another is that monthly payout from the long term disability benefit is a percentage of pre-disability income of the employee. Lastly, benefit period ends at age 65.

There are different kinds of benefit maximum which affects the premium you will pay for the individual long-term disability insurance. A non-evidence maximum is the amount of insurance that the insurance agent/company will provide without requiring the individual insured to submit medical evidence of good health and lifestyle at the time of insurance enrollment. The overall maximum is the maximum insurance benefit payout the insurance company is willing to insure you for. An all source maximum should be included in an individual long term disability insurance that accounts for all sources of income.

Individual long term disability insurance ceases when either of the following occurs: recovery, dies, retires, becomes 65, failure to provide proof of ongoing disability, refuses or fails to comply with third party subrogation provision, fails to report for a medical examination as required by the insurance company, ceases to receive professional treatment, refuses to participate in a rehabilitation program, or is confined in prison or similar environment.

Each individual long-term disability insurance policy have different conditions for payout, diseases or pre-existing illnesses that may be excepted, and various other conditions like lifestyle and habits. It is important to be aware of these differences, and find an insurance policy that best works for you. At Betters Insurance, we make sure that you have all the information you need to make an informed decision about your insurance policies, including paying for premiums, inclusions and exclusions to the plan, and other requirements.


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