Disability insurance basics.
- Short Term – 2 years or less
- Long Term – more than 6 months, usually several years
The most common form for both types of disability insurance are what are called “Any” occupation policies. What that means is once you are able to go back to work, even in a different job, you are no longer eligible for benefits. There are products available that are “Own” occupation or professional disability, which will pay as long as you are unable to do the profession you had when you became disabled. Own occupation policies are more liberal with payments, but will charge a substantially higher premium to make up for it. An estimated 40% of the workforce will suffer from some form of disability before they retire.
The other things you need to consider are the benefit period, how long it pays, and the elimination period, how long you must be disabled before it pays. A typical long term disability product might pay benefits for 5 years but have a 90 day elimination period. In that case you would probably want to look for a short term disability policy to pay benefits during that time.
It is important to discuss your options with an agent as soon as possible because disability insurance, like life, is less expensive when you are younger and healthier. Also, review your policy every few years or after any major increases in income to make sure it keeps up with your needs.