Disability insurance is designed to replace some of the income of an
individual in the event that they become disabled. While disability insurance
is designed to financially protect individuals when they can not work due to
disability, it is not designed to be a complete income replacement. Disability
insurance typically replaces around 50% of a person’s income depending on the
type of policy purchased. The benefits that can be received from these policies
are based on the past income of the person being insured. The insurance company
usually looks at the past two years of tax returns to determine the policy
owner’s annual income. In addition, insurability is based on the type of
occupation performed by the policy owner.
If the person buying the insurance performs more than one job, the insurance
company is going to look at the most hazardous of these occupations to
determine the risk of the individual. Disability insurance is typically
purchased with some of the same options as long-term care insurance. The policy
will have an elimination period, or a period of time that the policy owner must
be disabled before benefits will begin. In addition, the policy will have the
amount of time during which benefits will be paid—known as the benefit period.
For many policies, the benefit period can be as short as two years, or can be
until the policy owner reaches age 65.
Most companies that issue disability insurance do so for white collar
workers. People who work in executive-type positions are the individuals they
seek to cover. For people who work in blue-collar positions, especially police
officers, it can be difficult to get disability insurance. Companies that sell
disability insurance include Principal Financial Group, Prudential, and
Standard insurance companies. For blue collar workers and workers who have
higher-risk jobs, it would be good to check Assurity, which is known for
writing policies for these occupations.