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Disability Insurance: Concept and Types

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One of the major concerns people have, in general, refers to health. People always want to be and live healthy. For this matter, almost everybody does, at least, something in order to keep their health in good conditions. However, we must be conscious that there is no human being exempt from experiencing an injury. The fact that we are all susceptible is where the disability insurance lies on, and because of that, it is imperative that everybody become versed in the subject matter. According to the website, disability insurance is defined as “an insurance policy designed to pay a specified monthly income to the policyholder in the event that he/she becomes either temporarily or permanently incapable of working.”

Typically, disability insurance coverage is classified into two main categories or policies although other options may be available. The first one of them is the short-term policy, which is also called STD. This kind of policy provides the insured person with an income for the early stage of the disability. Commonly, this sort of policy is included in the benefit package for employees. The period of payments of the benefits may range from 2 weeks and up to 2 years. On the other hand, the second category corresponds to the long-term disability policy or LTD. This is available for a longer period of time that the previous one. What it does is to contribute replacing the income. It usually applies after five years or when the insured turn 65 years old.

Individual long-term disability policy is, likewise, classified in two main types too. They are called non-cancelable and guaranteed renewable. With the first one, you are sure that premiums cannot be raised but only if the required ones are paid on time. In contrast, a guaranteed renewable contract allows the company to raise the premiums provided that this change affects a whole policyholder class. Nevertheless, in both contracts, if the corresponding premiums are paid on time, the insurer can never decline to renew the policy. Thus, in general, the initial premiums for non-cancelable policies are a bit more expensive than guaranteed renewal policies.

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