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The Different Types of Disability Insurance

Insurance policies offer a shield against the unexpected but not every policy covers every situation. Even something like disability insurance plans varies in what they cover and who needs the protection. Individuals that want complete protection need to understand the details of disability coverage, so they purchase the right policy for their needs.

Coverage Based on Time

Short- and long-term disability policies exist, and nearly everyone should consider investing in both. 

Short-term coverage can last for as long as two years, so they are often much more useful than people realize. The benefits of these policies is they kick in within 0 to 14 days, if not sooner. 

Long-term disability policies on the other hand have a more extended waiting period of several weeks to several months, but can permanently cover the policyholder in some instances.

Protection Through Government Benefits

State and federal disability coverage also exist. Some plans, like Social Security Disability Insurance (SSDI), are available to all US citizens with employment experience. Employers often pay for state disability plans for their employees or they allow their employees to buy the coverage through a payroll deduction.

Specialty Disability Insurance Plans

Supplemental plans that fill the gaps between personal expenses and the benefits paid through an employer-based disability policy exist. Homeowners can cover their investment in their home with a policy that will pay the mortgage if a disability prevents the owner from doing it themselves. Business owners can choose policies that cover their operational expenses if they become sick or injured.

Variations in Many Policies

The policies can vary, even in each category. Some have protections for the holder of the policy that prevents the insurer from refusing to renew the plan or cancel the coverage. Many policies allow people to increase their coverage over time. Some disability insurance policies even allow the holder of the policy to work part-time while they collect partial disability benefits.

Final Thoughts

The decision about whether to buy a disability policy or what type to buy depends on needs. Someone with an adequate savings account may not need a short-term policy. People with employer-sponsored plans may never have to rely on federal programs. Nearly everyone should invest in some type of coverage. Look at your recurring bills, health insurance coverage, and available savings to determine how quickly a need would arise and use that as a starting point when shopping for a new policy.

Updated on March 31, 2020

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