Understanding Your Private Disability Insurance Coverage

Understanding Your Private Disability Insurance Coverage

Private disability insurance policies generally pay a portion of the disabled employee’s wages for a designated period. Many employers provide disability insurance for employees as part of a benefits package. Other people have private disability policies. If a person becomes disabled, understanding policy coverage and benefits is essential to prevent problems with claims and benefit payments.

Disability Insurance Coverage and Benefits

Insurance companies typically put limitations and restrictions on disability policies that can have a significant impact on a person’s benefits and quality of life.

Qualifying Disability

Insurance companies that offer disability insurance policies may define a “qualifying disability” in different terms. While some policies define a qualifying disability as one that meets federal guidelines, others may be more lenient. According to federal guidelines, an individual is considered disabled only if he/she has a physical or mental impairment that prevents the ability to perform work for more than one year or results in death. More lenient policies may allow shorter work-term restrictions.

Short-Term Disability

Short-term disability policies are designed to cover emergencies and short-term injuries and illnesses that last from three to six months. A typical short-term disability policy pays 60 to 70 percent of a person’s regular salary. Most short-term disability policies have a “cap” on maximum monthly benefits and a limited time to receive benefits.

Long-Term Disability

Long-term disability policies take effect when short-term policies run out. They’re designed to pay benefits to workers and individuals who suffer serious injuries and chronic illnesses and can’t work for an extended period of time. Long-term disability insurance pays a percentage of a person’s regular salary, usually 50 to 60 percent, until the person can return to work. Depending on the insurer, some policies pay benefits up to age 65, as long as the person remains disabled.

Many long-term disability policies require a person to apply for Social Security Disability Insurance (SSDI) benefits through the federal government to offset costs. If approved, the amount of the government disability benefits received are usually deducted from the private insurance benefits received. In such cases, the disabled person only receives the maximum allowed under SSDI or private disability insurance, whichever is larger. Some policies take a person’s additional sources of income, other than employment, into account and reduce disability benefits accordingly.