Disability is a condition that limits someone’s ability to work or do daily tasks. Disabled people can have physical and mental effects through this condition. As per WHO, 1.3 billion people exist in this world with disabilities! Yes, you read that right. Every 1 in 6 persons in this world is disabled in some way.
The effect of disability on their daily life can vary from person to person, depending upon the type of disability they have. Some individuals require special care, while others can go about their daily lives without external help. The factor that leads to disability in most individuals is poor living conditions and non-communicable diseases.
The percentage statistic in the US is even higher; 26% of adults have some form of disability, which might surprise some. The disability varies from people being seriously unable to climb or walk, difficulty concentrating, difficulty travelling or daily commutes, hearing issues, eye-sight issues, and others.
What is Long-Term Disability Insurance?
Long-Term disability insurance is a type of insurance that is dedicated to providing aid and income to individuals who have been identified as disabled or are unable to work because of physical or mental conditions. The primary purpose of long-term disability insurance is to provide stability to individuals struggling with the consequences of disability.
It is an excellent way to ensure a good chunk of people who are disabled do not feel left out. People with disabilities often have trouble with their finances, and it does become hard for them to pay their bills and afford day-to-day use necessities; a percentage of an insured disabled person’s income is paid by the disability insurance policy, to a certain limit, for a specific amount of decided time.
Pros of Long-Term Disability Insurance
Long Term disability insurance has a plethora of benefits for deficient individuals. Here’s a list of the best advantages that long-term disability insurance provides:
- Long-term disability insurance ensures that in case of a disability, an individual does not go through a severe financial crisis. Financial security is provided through insurance plans to disabled individuals who might find it hard to keep their job, meet their expenses, or keep the cash flow moving.
- Disabled individuals might find it hard to earn at the same scale that others do. This is because disability limits individuals’ ability to perform their tasks with the same efficiency, resulting in lost income. Long-term disability insurance ensures that a portion of lost income is recovered for all disabled individuals.
- Long-term disability insurance ensures that the medical expenses of disabled individuals are covered. Medical expenses are heavy on the pocket in the US, and long-term disability insurance provides great help to disabled individuals to make sure they aren’t burdened when they need medical healthcare services.
- Daily living cost is another area that long-term disability insurance covers. It helps disabled people in covering t costs of daily necessities.
- The best part about Long Term disability insurance is the peace of mind that comes with this plan. Life is unpredictable; no one knows what exactly the future holds. In case of an injury or illness that causes disability, you will be provided with insurance benefits. Once you sign up for the insurance, you don’t have to worry about any what-ifs, as you’ll know you are covered under the worst circumstances.
Cons of Long-Term Disability Insurance
There can be some downsides to long-term disability insurance as well. Here are a few disadvantages of this type of insurance.
- Generally, long-term disability insurance can be expensive. As a rule of thumb, the insurance plan can cost up to 1% to 3% of an employee’s annual salary. Even though in cases of an unfortunate accident leading to disability, it may be deemed a good return on investment, an upfront 3% annual salary is still considered too high for many.
- A long-term disability insurance plan may have long elimination periods. The elimination period is the time between the start of disability and the time you start receiving insurance funds. The person claiming the insurance is required to go through a qualification period to see if they qualify for the insurance. During the qualification period, the policyholder will pay the amount.
- In some cases, long-term disability insurance may have limited coverage, and clauses in the plan may cause that. The insurance does not cover self-causing injuries, criminal offences, acts of war, work injuries, and the consequences of armed services.
- It depends upon the definition in the plan to determine what individual qualifies as disabled. If the medical records do not prove a disability, you might be unable to claim it. Similarly, if a person can still do their job after being injured, they may not, in some cases, qualify for disability insurance.
- To claim the insurance, you must go through a required medical exam. During this period, all the healthcare costs are not covered by insurance.
Types of Long-Term Disability Insurance
There are two main types of long-term disability insurance: employer-provided and private.
Employer-Provided Long Term Disability Insurance
Long-term disability insurance is a part of the benefits package offered by many companies. In that case, your employer will provide you with the insurance at no cost. Also, you do not have to worry about monthly premiums as your employer will bear them. This insurance is typically beneficial and preferred by many, as there is no charge to be paid personally. There is an assurance at the back of the mind that you are getting covered in the case of an unfortunate emergency.
In the case of disability, the employer pays the employee income, typically until the age of retirement of the employee or until the disability of the employee is recovered. The various terms and conditions depend vary from plan to plan that is provided.
Private Long-Term Disability Insurance
The other option to look at while acquiring long-term disability insurance is to get it through an insurance company directly. As compared to the insurance that the employer buys, you may have the option to choose disability insurance that covers more options and has better benefits. Typically, private long-term disability insurance is expensive comparatively.
It would help if you looked for a private insurance agency with experienced agents to get you a long-term disability insurance plan that covers your required domains. It can be helpful if your work life is affected by an injury during your tenure.
Alternatives to Long-Term Disability Insurance
Long-term disability insurance is a good option, but it does become heavy on your pocket if you prefer to acquire it privately. If your employer covers it, there might only be coverage for some areas you seek. Both ways to get a long-term disability plan to have pros and cons, depending on your perspective.
If you are looking for alternatives to long-term disability insurance, you get a few sound options. Some important ones include social security disability insurance, workers’ compensation, and short-term disability insurance. Here’s a short overview of these:
Social Security Disability Insurance
Social Security Disability insurance (SSDI) is a US federal program funded by the US Social Security Administration (SSA). This program is intended to provide insurance to individuals who have disabilities and are unable to continue work for at least one year or have a disability that might lead to death.
For you and your family members to be covered by the insurance of the SSDI plan, it is necessary that you worked for at least ten years in the US, or you can qualify for SSDI if you have worked and paid social security taxes for at least 5-10 years. The benefits that you get depend upon your earnings throughout the years.
Short-term or partial disability is not included in the SSDI program. A criterion in the program decides if you qualify as a disabled person, and you must be younger than your full retirement for eligibility.
Worker’s compensation provides wage coverage and medical insurance to workers injured or ill due to their job. It is a disability insurance program for workers, and it provides wage/cash benefits and healthcare benefits to workers that have got injured. All of the states in the US handle workers’ compensation differently. The covered benefits also vary as per the program.
Overall, the coverage contains medical expenses, occupational therapy, and lost wages and is a way for the employee and employer to reach an agreement for work-related injuries in exchange for the employee’s right to sue the employer for work negligence.
Short-Term Disability Insurance
Short-term disability insurance is a type of insurance that covers employees who (have to) skip work because of illness or injury. The savings of an employee are not enough to cover their illness and daily expenses on days that they are unpaid, beyond their paid sick leave quota. This is where short-term disability insurance comes to mind. A percentage of the insured person’s income is paid for a set amount of time until a certain threshold is met. Short-term disability insurance is a great way to ensure that no minor injuries or off days at work because of illness throw you off track on your expenses and that your financial cash flow remains stable.
The unpredictable nature of life is a factor that makes the idea of having long-term disability insurance valid. As per statistics, every 1 in 4 Americans goes through a disability before their retirement age. Disability insurance can be a crucial part of your life should you go through an unexpected and unfortunate event and provides great peace of mind and financial security in times of crisis. However, before deciding, it is essential to look at the coverage, pros, cons, and benefits each plan provides before you choose to enroll in a long-term disability insurance plan.