Disability Insurance

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We have written extensively on insurance, mainly because it is an extensive topic. Insurance is a safety net, something to fall back on if bad things occur. Nearly anything of value can be insured – things, people, pets, etc. If said thing is injured or damaged, the insurance policy kicks in and subsequently covers a pre-agreed amount. Sometimes that amount is enough to replace said item, and other times the payout is more symbolic in nature. When it comes to disability insurance, this one hits close to home as it is income protection that insures the policyholder’s earned income against the risk that a future disability will hamper said person from being able to carry out his or her work related duties.

Disability insurance dates to the late 19th century and was first marketed as “accident insurance.” The very first company to offer this was the Railway Passengers Assurance Company. They would grant assurances to folks traveling by rail, and passengers had the option of purchasing a policy when traveling or not. This was sold at the time of the ticket and the company had to charge a higher premium for second and third class travel due to an increased risk of injury because of the roofless carriages.

Within the larger disability insurance sector, there are various types. For example, individual disability insurance is angled at those whose employers don’t provide standard benefits or for those who are self-employed and lack coverage (typically paid for by an employer). Benefits and premiums vary state by state, but premiums are normally higher for policies that have the disability defined in broader terms. High-limit disability insurance is for those who would like to keep their income at a level of at least 65% of their monthly total should something occur. Depending on the provider it is not uncommon to find monthly benefits reaching $100,000.

Business overhead expense disability insurance will reimburse a company for overhead expenses in the event the owner suffers an accident. The types of overhead expenses that would be reimbursed are rent, utilities, laundry, maintenance, employee salaries, property tax and other typical monthly expenses. Employer-supplied disability insurance is a big sector because one of the most common reasons someone claims a disability is via an on-the-job injury. Workers’ compensation offers payments to employees who suffer an accident and are disabled as a result. There is much debate on how to continue regulating workers’ compensation because fraud via the filing of false claims is rampant and controlling for this is costly and difficult.

The hardest thing to foresee or plan for in life is a disability. We all would love to pass through life unfazed and unharmed, but the odds are unfortunately staked against us. Insurance exists for a reason, protect yourself today.