| Long term disability |
| Written by Henry Johnson | |
Long-term disability insurance offers income protectionLong-term disability may seem like a long shot to you, but in actuality, there's a one-in-five chance that you may become disabled, making long term disability insurance a necessity.While most folks think in terms of work-related injuries when they think about disability, illnesses and other medical issues can also result in an employee being classified as disabled. According to the Unum Group, an insurance company, cancer is the leading reason for long-term employee disability. In 2007, more than a tenth of the nation's long-term disability claims were the result of cancer. Pregnancy and back issues were the other two leading causes of disability. According to the U.S. Census bureau, the average working American has a 20 percent chance of becoming disabled at some point in their work life. The average long-term disability absence from work lasts about two-and-a-half years, making long-term disability insurance a key component in securing the financial safety of you and your family. Becoming disabled can severely impact the finances of your family, because not only are you not earning an income, you're probably also racking up thousands of dollars in medical treatment bills. Long-term disability insurance can mitigate this, providing a continuing income to you and your family while you recover. Long-term disability policies can provide an income for two to five years, or even up until you reach retirement age. Long-term disability insurance takes over where short-term disability policies leave off. The average short-term disability policy covers a portion of your lost salary if injury or illness takes you out of the work force for longer than a week or so. Payments generally kick in when you have used up any available sick leave. Average policies cover about 60 percent of your income and generally last up to six months. Long-term disability policies offer about the same coverage, and kick in when short-term disability policies are exhausted. The average annual premium for a long-term disability policy is about $234, and many employers offer a flexible credit plan that helps defray some of the costs of these policies to the employee. With regard to taxes, if the employee pays his own premiums with after-tax dollars, his disability benefits will be tax-free. If his employer pays for the policy, most likely with pre-tax dollars, the employee's disability benefits will be taxable. Most long-term disability insurance policies cannot be canceled and are guaranteed to be renewed. Non-cancellable policies require a doctor to check you out before offering coverage, but the insurer cannot cancel the coverage or jack up premiums. If a customer buys a policy on a guaranteed renewable basis, the insurer cannot cancel the coverage as long as premiums are paid, but it can jack up the rates. Mitigating this is the fact that the insurer can only raise rates on groups, not specific individuals. This means insurers will raise rates for all insureds in a group if the group has experienced a very high number of claims. A key benefit of many individual policies are features that allow benefits to keep pace with inflation or gradual pay raises by means of a cost of living adjustment which adds a percentage to your coverage each year. Once an insured is disabled and is receiving long-term disability benefits, policy managers will try to get you to return to work as soon as possible to reduce their costs. Some policies even allow insureds to continue to receive limited benefits if they are able to return to work on a part-time basis, or take work with a less physically demanding job. With health-care costs increasing, and the rigors of the current recessionary economic environment, long-term disability insurance is a protection few workers, especially those with families to support, cannot afford not to have. |
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