Disability Insurance Articles

3 Factors That Can Affect Disability Insurance Benefits

2012-01-05

Disability insurance is not as common as other types of insurance. However, disability insurance is just as necessary as these other types of insurance, especially if a person has a job or condition that means they may very well become disabled in the recent future. To understand whether they need disability insurance and what kind of disability insurance to purchase, individuals need to understand three factors that affect disability insurance benefits: the type of policy, the definition of disability and the options that policy holders can select.

First, the type of disability policy greatly affects its benefits. Although most disability policies provide cash benefits for individuals who are not able to work due to disability, people must choose whether they want to purchase group or individual policies. Group policies are policies that individuals obtain through their employers. These policies typically offer better benefits with lower prices. People whose employers do not offer group policies will need to obtain individual policies. In addition, some people choose individual policies to supplement the level of coverage the employer offers. Individual policies may have excellent disability insurance benefits, but premiums for this type of policy are high.

Second, the disability insurance policy's definition of disability can greatly affect the benefits that insured people are able to cash in on. Some disability insurance policies have a narrow definition of what a disability is. If a person is unable to work for any other reason that the one outlined in their definition, that person cannot access benefits. However, choosing an insurance policy that has a wider definition of disability will allow an individual more access to their benefits. Although it may cost more, it is a good idea to find an insurance policy with "own occupation" coverage. This type of coverage means that an individual will get benefits if he or she is rendered unable to work in his or her own occupation. Not having this type of coverage is dangerous because insurance companies may refuse to disburse benefits because they claim that the disabled individual can work in another field, even though they may have no training or experience.

Finally, the policy options that individuals choose can have a large impact on disability insurance benefits. Some policies allow individuals to choose coverage until they reach the age of retirement -- after retirement, an individual's social security or retirement benefits kick in. Other policies allow individuals to choose coverage that adjusts based on the cost of living or that they can increase when they get a raise. Choosing these and other options can change a person's benefits. These options tend to cost more, but they can increase an individual's benefit amount.