Disability Insurance Articles
How Disability Insurance Differs From Basic Health Insurance Plans
2010-09-30
Disability insurance can be a very valuable buy for private individuals and businesses. However, there's a lot of confusion over the exact role of disability insurance. This is particularly true with the intention of the insurance policies as a whole; policy buyers frequently mistake disability insurance for other types of basic insurance plans, most commonly health insurance. There's not a great deal of overlap between a health insurance policy and a disability insurance policy. Understanding the differences between the two insurance types is absolutely essential for any person deciding whether to buy a disability insurance policy.
As its name implies, disability insurance is intended for people who become injured due to a disease, condition, or accident. When the person is unable to work, disability insurance kicks in and pays for a portion of the policy holder's lost wages. A very simple form of disability insurance is paid sick leave. Most private disability insurance policies will cover about 40-60% of lost wages, essentially allowing a temporarily disabled person to pay for regular bills that are not related to medical expenses until they're able to work again. Health insurance covers medical expenses, and this is the main difference between these two insurance types. Disability insurance will not cover the costs of health care, and health insurance will not cover lost wages. In order to be fully protected from unexpected circumstances, a person should have both types of basic insurance plans.
There are some slight similarities between health insurance and disability insurance. In order for a disability insurance claim to be legitimate, the disability must result from an unexpected circumstance. A claim made by a person suffering from a chronic illness that was not disclosed to the insurance company may not be honored. This is one basic similarity between health insurance and disability insurance, although basic insurance policies usually carry some disclosure of information requirement regardless of what is being insured. However, disability insurance policies are governed by different information requirements than health insurance policies. It's also important to realize that they're not necessarily the same thing as worker's compensation policies, so this does not mean that an injury or condition must have resulted from on-the-job duties.
Before you decide whether to buy disability insurance, you should make sure that you understand the exact purpose of a disability insurance policy. Ask your insurance agent to help you understand specific situations in which your disability insurance would pay out on a claim, and circumstances in which a claim would not be covered. Buying a proper amount of disability insurance requires an understanding of all of the terms in your contract.