Disability insurance companies offer workers the security of paycheck despite their inability to work. Debilitating situations are sometimes a direct result of employment (carpal tunnel syndrome from data entry or assembly-line work) and sometimes not (falling off a ladder while sprucing up the house). Regardless of cause, disability insurance companies cover workers physically unable to continue employment duties—meaning coverage is not restricted to only workplace injuries. Chiefly, three distinct types of coverage are offered by the majority of established companies.
Own Occupation Disability Insurance
Own occupation disability insurance is the most comprehensive package available. If an employee is physically unable to meet job requirements, the disability insurance company will cut a check according to the salary history of said job. The difference between own occupation disability insurance and other, less comprehensive plans is that workers can engage in supplementary employment while on disability insurance. Example: A carpenter is diagnosed with carpal tunnel syndrome and is unable to continue working as a carpenter; his or her disability insurance provider must supply insurance despite the fact that the aforementioned employee now holds down a desk job to keep him or herself busy and productive.
Income Replacement Insurance
Less comprehensive than own occupation, income replacement insurance does exactly as the name suggests: It replaces a worker’s source of income. If our carpenter attempted to gain employment in a non-taxing capacity with regards to the ailment, income replacement insurance payments would terminate, despite an inevitable slack in earnings from pursuing a new, limited occupation. One would assume, with such a strict caveat, that income replacement insurance costs significantly less than own occupation insurance, but the facts are quite contrary to this assumption (prices are virtually identical). Given the choice, always select own occupation disability insurance.
Gainful Occupation Coverage
The last and, frankly, worst form of coverage tendered by disability insurance companies is gainful occupation coverage. Insurance providers are granted a tremendous amount of leeway in determining whether a client is, in fact, disabled or unfit to complete the duties of current employment. A particularly troublesome proviso routinely appears in gainful occupation coverage documents stating that employees must, in order to receive paycheck reimbursement, be additionally unfit for other jobs he or she is trained for; meaning that our carpenter might be denied benefits if the insurance carrier decided he or she was still fit for sweeping, and therefore not altogether unemployable. Avoid gainful occupation coverage.
Getting disability insurance from employers ordinarily requires a service wait—an agreed upon amount of time of full-time employment before eligible for benefits. Many employers solely offer short-term disability insurance (STD). STD is highly restricted in terms of definitions of disable and in length of coverage. STD coverage ends after a year, which might seem like a long time, but for those unable to collect a paycheck due to health, a year, is many times, not enough time to fully recuperate.
When deciding upon disability insurance companies or specific coverage, remember what, exactly, is at stake: Your livelihood. Your paycheck takes care of you, be sure to take care of your paycheck as well.
By Jean-Pierre Lacrampe