What Are the Functions of Disability Insurance?

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Disability insurance provides income when injuries or illness prevent you from working. Inability to perform your occupation not only presents the risk of lost job income, but also keeps you from handling everyday expenses. Disability insurance provides benefits to maintain your standard of living while you recover from or deal with a disability.

Loss of Income

Like other forms of insurance, disability insurance helps you deal with the unexpected. Health insurance might cover your medical bills, but a loss of income can hinder your ability to take care of mounting bills for your home and family.

You might have utility, rent or mortgage payments to make. You might need income for your children’s educational needs. You also need money for food and clothing.

Loss of income can have devastating effects whether you are out of work for weeks, months or years. Not only does it interfere with paying expenses, it keeps you from saving money for the future.

Short- and Long-Term

Millions of Americans are permanently disabled, while others lose months of work. Disability insurance allows you to tailor your needs around these possible risks, according to your line of work or your personal satisfaction and peace of mind.

You can choose short-term or long-term insurance. Short-term policies protect you from temporary loss of work caused by sickness or accidents. Some companies include short-term disability in their health coverage, but the benefits might be for a limited time. Workers' compensation protects you from work-related accidents, but disability insurance provides protection no matter where an accident or illness occurs.

Long-term disability insurance covers you for a longer period, even years, when you can't work.

Other Methods Have Limits

Many people put off purchasing disability insurance because they believe their current health plans or government programs can help. The Social Security disability insurance program might offer only $1,000 a month, and also it has strict requirements for receiving benefits. Government programs offer types of disability insurance, but those usually do not cover your normal standard of living.

Benefit Amounts

Individual insurance policies, such as disability insurance, become an alternative remedy when companies cut health benefits for employees. The amount you receive when a disability occurs depends on the policy. You could receive 65 percent or more of your regular income. Other polices provide 50 percent of your normal income or less, depending on your situation or policy selection.

The aim of many disability insurance policies is to help you maintain your lifestyle without losing the incentive to get back to work. Many insurance companies keep disability benefits at a lower scale than your standard income to discourage fraud.

Disability insurance won't necessarily act as a replacement for your full income, but as a way to fill in financial gaps until you return to work or adapt to your disability.