Disability insurance provides income protection if you become unable to work due to illness or injury. It’s designed to replace a portion of your lost income and ensure financial stability during a challenging time:
Short-Term Disability Insurance: This coverage provides income replacement for a limited period (usually a few months) after a disabling illness or injury prevents you from working.
Long-Term Disability Insurance: Long-term disability insurance kicks in after the short-term disability period ends. It provides income replacement for an extended period, potentially until retirement age, depending on the policy terms.
Own-Occupation vs. Any-Occupation Policies: Own-occupation policies pay benefits if you can’t perform the specific job you held before becoming disabled. Any-occupation policies only pay benefits if you can’t perform any job for which you are reasonably qualified.
Coverage Amounts and Elimination Periods: Disability insurance policies specify benefit amounts (typically a percentage of your income) and elimination periods (waiting periods before benefits start). Lower elimination periods usually mean higher premiums.
Optional Riders: Some disability insurance policies offer riders for additional coverage, such as cost-of-living adjustments (COLA) to keep pace with inflation or partial disability benefits if you can work part-time.