Disability Insurance Articles

The Function Of High Limit Disability Insurance Policies

2010-09-06

Before delving into the function of high limit disability insurance policies, it's helpful to know what disability insurance coverage is and how it works for most policy holders. Disability insurance coverage is designed to provide for the costs of basic living and care of people who have been injured or became sick and can no longer work. On one level, there is the Social Security's disability program and Medicaid will cover some disability costs. These programs do not cover much, though. People with needs for assisted living or in-home care should be covered by a private policy. Medicaid requires that a claimant for benefits be all but impoverished, a sacrifice that many people don't want to make. Disability insurance coverage can be tailored to cover any contingency, from permanent disability to inability to continue to pay the insurance policy premiums. It all comes at a cost, of course, and some options may be too expensive for the average person.

One very important aspect of disability insurance is its function in asset preservation. A person's home, possessions, investments, and general lifestyle can be completely eaten up by the expenses incurred with a disability. Knowing that the mortgage can still be paid even when one is unable to work can provide tremendous comfort at a very stressful time of life.

Normal disability insurance coverage will usually only provide an upper limit payout cap of $20,000 to $25,000 per month. For a tradesman or a middle manager earning less than $100,000 a year, this can be completely sufficient to continue their customary lifestyle. What about people who earn immense salaries, such as CEO's, professional athletes or upper management, who take home millions a year? The cap on normal disability insurance payouts would be pitifully small and do almost nothing to preserve the lifestyle they've established. That's where high limit disability policies come into play.

A high limit disability policy is generally added on to existing coverage. Such policies are generally designed to provide 65% of a person's income, with no upper limit on the salary amount. For people such as professional athletes or high level college athletes with plans to play in the professional leagues, policies can be written against career ending injury. Often teams will take out high limit disability coverage on their athletes to mitigate the outlay of salary to an athlete under contract who becomes disabled.

The essential function, therefore, of a high limit disability insurance policy is to provide those with tremendous assets the corresponding coverage against loss available to people of lesser means. It is an evening of the playing field in an upward direction.