Types of Disability Insurance

 

Individual disability insurance

Those whose employers do not provide benefits, and self-employed individuals who desire disability coverage, may purchase their own policies on the open market. Premiums and available benefits for individual coverage vary considerably between different companies, for individuals in different occupations, and by state and country. In general, premiums are higher for policies that provide more monthly benefits, pay the benefits for a longer period of time, and start payments for benefits more quickly following a disability. Premiums also tend to be higher for policies that define disability in broader terms, meaning the policy would pay benefits in a wider variety of circumstances. There are many web-based disability insurance calculators to determine the disability insurance needed.[3]

 

High-limit disability insurance

Traditional disability carriers have limitations on the monthly benefits that can be purchased, which limit the benefits for high income earners. Benefits will normally cap at $20,000-$25,000 of monthly benefits except in the high-limit disability market. High-limit disability insurance is designed to keep individual disability benefits at 65% of income regardless of the income level. Coverage is typically issued on top of coverage that is already in force. With high-limit disability insurance, benefits can be anywhere from an additional $2,000 to $100,000 per month. Issue (one policy) and participation (other individual disability insurance or group long-term disability) coverage has gone up to $30,000 with some companies.

 

Key-person disability insurance

Key Person Disability Insurance provides crucial benefits for any functioning business to protect the company from financial hardship that may result from the loss of a key employee due to disability. Key Person coverage provides cash flow to help a company move forward and maintain a profit in the event a key employee becomes disabled. The company could use the disability benefits to hire a temporary employee should the disabled employee's prognosis appear to be a short-term disability. In the unfortunate circumstance of a permanent disability, benefits would then be used to help defray the costs related to hiring a replacement employee, such as recruitment, training, startup, loss in revenue and unfunded salary continuation costs.

 

Business overhead expense disability insurance

Business Overhead Expense (BOE) coverage is designed to reimburse a business for overhead expenses should the owner experience a disability. Eligible benefits include: Rent or mortgage payments, utilities, leasing costs, laundry/maintenance, accounting/billing and collection service fees, business insurance premiums, employee salaries, employee benefits, property tax, and other regular monthly expenses.

 

National social insurance programs

In most developed countries, the single most important form of disability insurance is that provided by the national government for all citizens. For example, the UK's version is part of the National Insurance; the U.S.'s version is Social Security (SS)—specifically, several parts of SS including Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI). These programs provide a floor beneath all the other piecemeal forms of disability insurance. In other words, they are the safety net that catches everyone who was either (a) otherwise uninsured or (b) otherwise underinsured. As such, they are very large, very important programs, with many beneficiaries. The general theory of the benefit formula is that the benefit is not large but is enough to prevent abject poverty.

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