How does Individual Disability Insurance work?

Work Wisdom

How does Individual Disability Insurance work?

YOLO, amirite? But what happens if while you’re off YOLO’ing, you get injured and can’t work? The probability of that occurring is greater than you might think. According to the Council for Disability Awareness, one in four of today’s 20-year-olds have a chance of suffering a disability that keeps them out of work for at least a year before they retire.

And Unum’s 2020 Consumer Disability Study found more than half (55%) of U.S. workers don’t have disability insurance to protect their most important asset: their income. They’re more likely to protect their homes, phones or cars. But if they lose their ability to earn a paycheck thanks to a gnarly mountain bike spill, they might not be able to keep those assets.

Disability insurance is a financial safety net designed to protect you against unexpected health events. It replaces a portion of your income if you get sick or injured and can’t work. There are two main types – short term disability (STD) and long term disability (LTD) – and they typically replace around 60 percent of your paycheck. Short term benefits can last for up to several weeks, and long term benefits can last from several month to several years.

There’s also individual disability insurance. IDI, also known as supplemental long term disability insurance, is quite simply an extension of your long term disability plan. It can pay an additional monthly benefit if you’re out of work due to a covered illness or injury and can cover income from bonuses, commissions, and other incentive pay. The benefit helps you get closer to your former take-home pay and is great for those who need more than 60 percent of their typical income in the event of disability.

“There’s no doubt about it, for most employees, LTD coverage is an effective way to protect income in the event of an illness or injury,” says Branden Pierson, national sales leader for executive benefits for Unum. “However, for people who earn higher incomes, LTD coverage might not be enough. With IDI, employees have the option of up to 100% income replacement coverage for catastrophic disabilities.”

Like any other disability coverage, you don’t receive benefits right away with IDI. After satisfying your plan’s elimination period, you would receive benefits for the length of time your policy allows. Some policies will pay benefits until you turn 67. Others have maximum benefit periods as short as two years.

­­­“Today, IDI plan designs are flexible and customizable to the needs of companies and their employees,” says Piersen. “While the coverage is employer-sponsored, it is individually owned, so you can take it with you when you leave a job or start at a new company. Another advantage is that rates for an employer-sponsored plan can be significantly less than coverage on the street for a single policy.”

For more information about Individual Disability Insurance and other employee benefits that can help you focus on getting better, visit Unum.

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