Different Types of Disability Insurance Plans

 Disability insurance or DI acts as a cushion during situations that trigger financial problems. This is known as financial cover, for durations a person becomes ill and is disabled to work or get paid, affecting usual basic expenses each month. There are varieties of disability insurance plans available for individuals employed by employers, or self employed, as well as business owners, in case they fall sick or are temporarily disabled to work and earn.

 Types according to duration of Disability

 When duration of the cover is considered, these plans may be categorized widely into two types namely, Short term disability insurance and Long term disability insurance. Returns on both the type of insurance plans vary. Short term plan may reimburse their wages during loss of work due to disability that lasted for short durations, while long term cover provides income for longer durations and is a more permanent source of income, when compared to short term plans.

 Short term DI: Waiting period for getting reimbursement or payment is usually 2 to 3 weeks. One is provided with benefits for duration of 13 to 26 weeks. Complete or partial salary replacement is provided, depending on the plan chosen or plans offered by company for short term DI. Most of the short term disability premiums are provided by employer and paid by him, but are taxable once they reach employee as benefits.

 Long Term DI: Duration for usual long term plans for DI cover up to 5 years. Few plans that cover until one turns 65 years are also available. Waiting period for this sort of DI may be around one month, to 6 months. When premiums are paid by an employee, they may enjoy benefits tax free. One may get 70% of their payment, from which they may have to pay their premiums. If premiums are paid by employer, the amount is taxable, as soon as it reaches the employee.

 Depending on circumstances and lifestyle of a person, they may have to opt either of the insurance plans or both. Basic long term disability cover is provided by Social Security Administration, while short term disability covers may have to be purchased separately.

 Types of disability Insurance for Business Companies

A business owner may cover his or her business for disability, or illness that affects himself or key player in business. This disability is usually limited to short periods. Different types are mentioned below.

Business Overhead Expense DI: If a business owner suffers illness, he or she is entitled to reimbursement for overhead expenses like rents, employee salaries, mortgage payments, monthly taxes, billing, service fee, maintenance, laundry and other such compulsory expenses that are incurred during normal course of running a business.

Key Person DI: A business may be secured to cover for illness of key player for short durations. This cover gives necessary cash flow, in the event of key player becoming disabled or falling sick. If the employee or key player is disabled permanently, this temporary benefit provided can be used for hiring a new key player.

Individual DI: A person may secure their business for short term disabilities, by purchasing a plan from open market. There are numerous companies offering different covers, according to premiums one accepts to pay. Higher premiums offer more benefits while lower premiums offer fewer benefits. Depending on the size of business and its profit margin, one should choose the right DI cover plan to secure their business.

Type of DI for Employees or Workers

Employer provided DI: A company employee may also get covered by the employing company. Company policies mention this type of cover for their employees along with details of benefit package provided. A company employee should not rely completely on this sort of disability insurance, but take care to purchase other cover policies to secure his or her future.

Workers compensation: This is typical cover that is provided for workers who are temporarily disabled due to injury sustained at work. Medical benefits, reimbursement of pay and compensation are covered under this form of DI plan.

National Social DI: National government provides a very basic cover for disability in a person that interferes with their work and pay. It is known as Social Security Disability Insurance or Supplemental Security Income. Every person who is uninsured with any other policies or covers is covered using this National plan. Benefits from these plans are not very high paying but are enough to cover basic necessities and avoid severe poverty.

DI for the High Income Group: Usual conventional DI plans may offer maximum benefits of about $25,000 per month, if one wants to get higher benefits; they may have to opt for a High limit DI plan that needs one to pay higher premiums. The minimum benefit for such plans may be around $2000 and maximum may go up to $100,000 a month, depending on the plan chosen.