| There are two types of Disability insurance a person | | | | Long-Term benefits become payable. It can be |
| can have: Long-Term disability and Short-Term | | | | described as an insurance that provides you with sick |
| disability. Depending on your work situation, you may | | | | leave. Being that Short-Term disability insurance pays |
| be eligible for both types of coverage through your | | | | for relatively short benefit periods, it is protection |
| employer in the form of a group plan. For those who | | | | against a simple type of injury or sickness, but not |
| are not provided these benefits at work, you are able | | | | something major. |
| to obtain both Short and Long-Term coverage directly | | | | A Long-Term disability policy will usually be designed to |
| through an insurance company on an individual basis. | | | | begin paying benefits after 90-days of being disabled |
| Individual Disability insurance must be applied for. The | | | | and will continue paying benefits for 5-years, 10-years |
| application process is fairly uniform amongst the | | | | or until retirement age, depending on which benefit |
| various insurance companies and will traditionally | | | | period you choose. Long-Term disability is the type of |
| require the applicant to complete a paper/electronic | | | | coverage that can truly save a person from facing a |
| application, an insurance medical exam, a phone | | | | complete financial disaster. We live our lives expecting |
| interview and provide tax returns as proof of income. | | | | and assuming that our ability to work and earn an |
| Without getting too far into the details of this process, | | | | income will never cease. Without that ability to continue |
| you can expect that obtaining a policy will take | | | | earning an income however, we are no longer able to |
| anywhere from 3-8 weeks on average. | | | | support our lifestyles and financial responsibilities. |
| The big dilemma that many people will face is whether | | | | To clarify: assume a person has $5,000 of monthly |
| to obtain Short-Term or Long-Term disability. Solely | | | | benefit on his/her Short-Term and Long-Term disability |
| based on the potential loss of a Long-Term claim vs. a | | | | policy. If this person incurs a Short-Term claim of 5 |
| Short-Term claim, it certainly makes more sense to | | | | months, assuming a 14-day waiting period, he/she will |
| have Long-Term protection, but it is often not that | | | | be eligible for a total of $22,500 over the 5-month |
| simple. In order to clarify this issue, consider what each | | | | claim. Although this is a substantial amount of money |
| is truly protecting. | | | | and not having it can certainly create financial hardship, |
| Traditionally, a Short-Term disability policy will be | | | | this is probably not sufficient to cause a bankruptcy or |
| designed with a 7-14 day waiting period and 3-6 month | | | | foreclosure. If this person incurs a longer claim of |
| benefit period. This means that benefits will become | | | | 4-years, the total benefit paid would be $240,000. |
| payable after 7-14 days of being disabled, and will | | | | Clearly, with Long-Term disability insurance you are |
| continue to be paid for up to 3-6 months for any one | | | | protecting a much larger risk. A loss of $240,000 is |
| illness or injury. In most situations, Short-Term coverage | | | | much more likely to cause bankruptcies, foreclosures |
| is intended to pay benefits during the waiting period of | | | | and a severe financial disaster than a loss of $22,500. |
| a Long-Term disability policy, but terminate once the | | | | |