5 Things You May Not Know About Disability Insurance
Owning a disability insurance policy may help you feel financially protected if you are unable to work due to a covered illness or injury. Whether you’re debating getting disability insurance or you’ve already signed up but are still a little fuzzy on the details, here are five things you may not know about disability insurance:
You may or may not be able to keep your coverage after leaving your employer.
Disability insurance can be purchased as an individual policy directly through an insurance company, or as a group policy through your employer. If you have a group disability insurance policy, you may have a portability option. If your coverage is portable, you may be able to take all or a portion of your disability insurance coverage with you if you leave your employer. If your coverage is not portable, you will lose your policy upon termination of your employment.
You may have the option to choose your elimination period.
Disability insurance policies typically have elimination periods. An elimination period is the time between the date when you were unable to work and the date you will begin to receive benefits. Elimination periods can vary, with time periods anywhere from 0 days to 365 days. Sometimes your employer chooses the elimination period options for your benefits, while in many cases you have the option to choose what is best for your financial situation.
When considering your elimination period, think about how many sick days you have and how long you could go without a paycheck. Use that amount to determine which elimination period to choose. For example, if you know you have a solid bank of vacation time you could use, or you know your spouse’s salary could get you by for about a month, you may want to choose a 30-day elimination period. In many cases, a longer elimination period results in smaller premium payments than a shorter elimination period plan. Your premium may be different, but the benefit amount will be the same.
Your benefit period starts after your elimination period is over.
First, it’s important to understand how a disability claim timeline works. When you experience a covered injury or illness, your physician will determine how long you are unable to work. Let’s say that your physician states you cannot work for 8 weeks total. Your elimination period will start on the date you become disabled. Then, once your elimination period has passed, you will begin your benefit period. In this situation if you had a 14-day elimination period, your benefit period would be 6 weeks.
Your benefit amount may be affected by your benefit period.
When you have a monthly disability benefit, benefits are payable as a monthly rate and any period that is less than a full month will be prorated. Like in the example above, your benefit period may not equal exactly one month. For example, let’s say your benefit period starts on January 15. If your benefit period is 6 weeks long, it will end on February 25. You will receive one benefit payment for January 15-February 14, and another prorated amount for February 15-25. This timeline could vary based on when a claim is processed, as well as how your specific plan is designed.
Disability benefits don’t automatically increase with your salary.
Your disability benefits are based on your salary at the time you first enrolled. They will only increase to match your current salary when you request it – not automatically during enrollment every year. When your compensation changes, discuss this with your account manager at your enrollment to increase your benefit amount. Learn why you might want to increase your coverage ►
This blog is up to date as of March 2021 and has not been updated for changes in the law, administration or current events.
