Disability insurance

Disability insurance protects your income in the event of a disability preventing you from earning income through employment.  Social security has a disability program which provides some amount of coverage in the event of a long term disability.  The social security disability program provides long term benefits with an elimination period of 6 months.  What this means is that a person must be disabled for six months before they can begin collecting benefits.  More information about the details of this coverage can be found on your social security statement, or by accessing your social security benefit information online at www.ssa.gov.

In addition to benefits provided through social security, you can also obtain coverage through a group plan such as an employee group or union, or purchase individual coverage through a private insurance carrier.  Private disability insurance is subject to stringent underwriting requirements, and pricing is based upon occupation, health, benefit amount, and time frame of benefits which are provided.

Private disability insurance can be either short term or long term.  Short term disability insurance covers disabilities lasting from a few weeks to several months or a year, while long term disability insurance coverage begins after an elimination period of several months to a year and lasts anywhere from a few years up to retirement age or longer.

Risk management – unemployment, disability, dependent survivors

We will discuss how to protect against the most common risks – unemployment, disability and death.

Unemployment

Unemployment insurance is typically provided by state or federal government programs.  Private insurance for this type of issue does not exist for the most part, and in order to take a proactive approach to managing this risk an emergency fund should be established.

Disability

Disability insurance is provided by the federal government through the social security program, and in some situations is mandated by states through workers compensation laws.  Many employers and unions provide disability insurance for their employees and members.  A proactive approach can be taken by purchasing private insurance coverage as well.  Pricing for this type of coverage is typically based upon age, health and occupation.  Disability insurance can generally be broken down into two types: short term disability insurance (STD) and long term disability insurance (LTD).  Short term disability programs typically cover events lasting from a few weeks to a year, depending on the particular coverage, while long term disability coverage typically covers events which are long term in nature.  Disability insurance policies are typically subject to an elimination period, which is the minimum amount of time which the disability must last in order for the policy holder to begin collecting benefits.

Dependent survivors

Coverage to protect dependent survivors in the event of death of a breadwinner is typically provided by purchasing life insurance.  Social security also has a dependent survivor’s benefit program, where benefits are provided to a surviving spouse as well as to surviving children.  Details of this coverage can be found in the social security statement.