The terms of a disability policy vary depending on the type of coverage you want, and want to pay for, and what coverage the insurance company is willing to offer. Disability insurance policies are available either directly from an insurance company or as an employee benefit offered by some employers to their employees.
For coverage offered through your employer (often referred to as group employee coverage), the terms of the disability policy are negotiated and finalized as a contract between your employer and the insurance company. It is essential that you get a copy of the policy from your employer's Human Resources department. For an individually purchased policy, you would obtain a copy of your policy directly from the insurance company. Policies are generally offered as short-term disability (STD) policies or long-term disability (LTD) policies depending on how long they pay benefits.
Short Term Disability (STD) Insurance
If a physical or mental health impairment prevents you from working for less than one (1) year, this typically would be covered by a short-term disability policy. You can choose whatever length of time you wish for the benefit period. Typical benefit periods range from 3 to 12 months. The amount of benefit you are entitled to receive and the length of time you are entitled to receive it is based on premium that you or your employer pay for the policy.
It is common for a STD policy to pay up to 70% to 80% of a person's weekly earnings. You have the option to choose how much a policy will pay, but keep in mind that receiving a greater percentage of your earnings from the policy benefits will cost more in terms of the premiums charged by the insurance company.
Long-Term Disability (LTD) Insurance
LTD policies pay for a longer period that you are out of work than do STD policies. LTD benefits usually cover only a portion of what you earned while working. The amount depends on the maximum benefit the insurance company allows and how much you want to spend on the policy, i.e., the premium you are willing to pay. A policy that pays a higher percentage of your earnings will usually be charged at a higher premium.
Benefit periods may be chosen for whatever number of years that you want and that the insurance company is willing to offer. Some of the main factors an insurance company will consider in deciding what coverage it is willing to offer are your age, your gender (on average, women live longer which often translates to higher premiums), your job (how dangerous is it?), your income (how much will the insurance company have to pay out?), your medical history, and your lifestyle. Typical LTD pay is about 60% of what you earned when working, but this percentage will range from policy to policy.
Waiting Periods
Both STD and LTD policies usually include a waiting period, i.e., how long you will have to wait after you are disabled to start receiving benefits. All policies have at least a 30-day waiting period before they start paying you benefits. Otherwise, if you missed one day from work, they would have to pay you for that day. But other policies will include an additional waiting period, after the first 30 days, making it even longer before the insurance company has to start paying you benefits—60, 90 or even 120 days. The longer the waiting period, the lower the premium.
To determine how long of a waiting period you should select, try to determine how long you could go without earning income. If you've saved up enough to cover three (3) months' worth of your living and daily expenses, take a 60-day waiting period. The 60-day period would begin after the first 30-day period, giving you an overall waiting period of 90 days, 3 months.
Get Help Filing a Disability Claim
If you feel you have a valid claim for STD or LTD benefits, it is best to file it as soon as possible to start the waiting period and get your benefits, if your claim is approved, sooner. However, it is always in your best interest—as with filing any insurance claim—to make sure you understand the process and have someone looking out for you while your insurance company is investigating and adjusting your claim. For this reason, we recommend you contact an experienced lawyer like our team at Taylor, Warren, Weidner & Hancock, to assist and educate you during the process and work to protect your rights.