Here’s a step-by-step explanation of how disability insurance works:
1. Choosing a Policy:
- Types: Decide between short-term or long-term disability (or a combination).
- Benefit Amount: Select the monthly benefit you would need (typically a percentage of your income).
- Waiting Period: Choose how long you’re willing to wait before benefits start (longer waiting period = lower premiums).
- Policy features: Look at specific definitions of disability, coverage limits, and any special riders (optional additions).
2. Paying Premiums:
- You pay regular premiums, typically monthly, to keep your policy active. The cost depends on your chosen coverage, age, health, and occupation.
3. Qualifying Disability Occurs:
- Covered event: An illness, injury, or other disabling condition included in your policy’s terms prevents you from working.
- Doctor documentation: You’ll need medical evidence to support your claim.
4. Filing a Claim:
- Contact insurer: Notify your insurance company and begin the claim process.
- Provide evidence: Supply medical records, income verification, and complete any required forms.
5. Waiting Period:
- This is the agreed-upon time (e.g., 30, 60, or 90 days) after the disability before benefits begin. Short-term disability often has a shorter waiting period than long-term disability.
6. Receiving Benefits:
- Approval: If your claim is approved, you start receiving benefits, typically a percentage of your pre-disability income.
- Benefit duration: How long you receive payments depends on your policy, the nature of your disability, and if you continue to qualify.
Important Things to Know:
- Definition of Disability: Policies vary in how strictly they define “disability.” Some might only cover you if you can’t work at all, while others cover partial disability or inability to work in your specific job.
- Exclusions: Pre-existing conditions or certain types of disabilities may not be covered.
- Review: Regularly review your policy to ensure your coverage fits your needs, especially if your income or job situation changes.