Disability Insurance Articles
How Disability Insurance Benefits Are Determined And Paid Out
2010-12-14
Disability insurance is typically purchased in percentage-based increments determined by your average salary. Once waiting periods and disability requirements have been satisfied, the policyholder will begin receiving disability benefits. Depending on the policy terms, disability insurance typically reimburses the policyholder for 50 to 70% of their average earnings. Unfortunately, policies also have exclusions, waiting periods and disability criteria that must be met before benefits are awarded to the policyholder. To ensure you purchase adequate disability coverage, it's important to be familiar with restrictions that could prevent you and your family from receiving benefits.
The percentage of your disability benefits also determines the cost of your annual premium along with several other factors like waiting periods. One thing to remember when estimating the full percentage of your benefits is whether disability benefits from the Social Security Administration will be factored in the overall calculation. In some cases, carriers will deduct disability benefits received from Social Security, so policyholders never receive more than the 50% or 70% ceiling.
The definition of disability varies with all disability insurance plans, so it's always important to know how your provider determines the meaning of unable to work. Many policies require beneficiaries to be completely disabled before any benefits are awarded. These policies typically require policyholders to be unable to perform any sedentary occupation to meet the definition of total disability. To avoid restrictive disability requirements, policyholders can opt for partial disability coverage as well as own-occupation coverage; this guarantees you disability benefits based on earnings in your profession. Plans that offer partial disability coverage are a great way to bridge the gap in your earnings during recovery.
Insurance with partial disability benefits will continue to supplement your earnings if you return to work part-time or in a limited capacity. In any occupation, partial-disability benefits can help relieve the financial stress of increased expenses and medical bills. Depending on your situation, you might be able to extend disability benefits if your physical rehabilitation is going slower than originally estimated. Although there are limits to the length of time policyholders can continuing receiving benefits, some patients can extend disability benefits by submitting approved forms validated by the treating physician.
To ensure your disability benefits are adequate for maintaining your family's standard of living, it's important to consider how you will budget during the waiting period and what will happen if you don't meet the definition of total disability. When paying the bills and supporting your family are paramount, purchasing a disability insurance policy with partial-disability benefits and a waiting period of less than six month after the initial injury will ensure the financial well-being and security of your family is always protected.