Types of Individual Disability Income Insurance
When looking for disability income insurance, there’s several options available on the individual side. First, there’s accident-only coverage, meaning it will pay for disabilities caused by accidents. It will not, however, cover disabilities caused by illnesses because it is accident-only. Generally, an accident-only plan is inexpensive and can easily be paired with an accident-only life policy.
There’s also simplified-issue disability insurance, which is similar to a group plan. For instance, the premiums for both a simplified-issue and group are roughly the same. To qualify for a simplified-issue, the insurer asks a few knock-out questions. As long as the individual answers ‘no’ to the questions, they get the coverage. However, the coverage period usually ends after two years. In addition, simplified-issue plans have a cap on the amount of income that it’s going to replace. In other words, it’s not going to fully replace someone’s gross or net income. Typically, the plan will cover about 60-70% of a person’s taxable income.
Short-Term and Long-Term Plans
There’s also short-term disability insurance. It’s available in two forms: accident-only coverage or the full health and accident coverage. In addition to short-term, there’s long-term disability insurance. If you have a group plan that covers disability income, then you cannot purchase a short-term or long-term plan on the individual market to supplement your group coverage. Like the simplified-issue plan, these plans are designed to cover only 60-70% of someone’s income, not the same amount or even more of what they earned prior to disability. Therefore, a person can not have their own plan in addition to a group plan. The plan is simply there to ensure someone doesn’t lose everything.
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