Unraveling the Safety Net: What Does Disability Insurance Cover?

Wellman Shew
3 min readJul 26, 2023

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Disability insurance is a crucial safety net that offers financial protection to individuals who find themselves unable to work due to a disabling injury or illness. Unlike health insurance, which covers medical expenses, disability insurance focuses on replacing lost income and supporting the insured individual during their time of incapacity. In this article, we will delve into the world of disability insurance and explore the essential aspects of coverage it provides to policyholders.

Income Replacement

The primary purpose of disability insurance is to provide income replacement in the event of a disability that prevents an individual from performing their regular job duties. Depending on the policy’s terms, disability insurance can replace a percentage of the insured person’s income, typically ranging from 50% to 70%. This income replacement ensures that the individual can continue to meet their financial obligations and maintain their standard of living during their period of disability.

Short-Term Disability Coverage

Short-term disability insurance offers coverage for a limited duration, usually ranging from a few weeks to several months. It kicks in shortly after the insured person becomes disabled, allowing them to continue receiving a portion of their salary. Short-term disability coverage is particularly beneficial for individuals who have used up their sick leave or need time to recover from temporary medical conditions or injuries.

Long-Term Disability Coverage

Long-term disability insurance takes over when short-term coverage ends or when an individual’s disability is expected to last for an extended period, usually beyond six months. Long-term disability policies generally pay out until the insured person can return to work, reaches retirement age, or the policy term expires. This long-term coverage ensures that the insured person’s income is protected for an extended duration, providing much-needed financial security during prolonged incapacitation.

Total and Partial Disability

Disability insurance often distinguishes between total and partial disability. Total disability refers to a situation where the insured person is entirely unable to perform their job duties due to their condition. In such cases, the policy will provide full income replacement.

Partial disability, on the other hand, comes into play when the individual can still work but is not able to perform all of their regular job tasks or is unable to work full-time. In these instances, disability insurance may provide a partial benefit proportionate to the loss of income caused by the partial disability.

Coverage for Accidents and Illnesses

Disability insurance covers a wide range of accidents and illnesses that can lead to disability. Whether it’s an unexpected accident or a severe medical condition such as cancer or heart disease, disability insurance offers protection in various scenarios. It is crucial to carefully review the policy to understand the specific accidents and illnesses covered and any exclusions that may apply.

Own-Occupation vs. Any-Occupation Coverage

Disability insurance policies can be classified into two main categories: own-occupation and any-occupation coverage.

Own-Occupation Coverage: This type of policy provides benefits if the insured person becomes disabled and is unable to perform the specific duties of their own occupation. It offers a higher level of protection since the insured person will still receive benefits even if they can work in a different occupation.

Any-Occupation Coverage: Under this policy, benefits are paid only if the insured person cannot perform the duties of any occupation suitable based on their skills, training, and experience. It is generally less expensive than own-occupation coverage but offers a lower level of protection.

Additional Riders and Features

Disability insurance policies often come with additional riders or features that can be added to enhance coverage. Some common riders include:

Cost of Living Adjustment (COLA): This rider adjusts the disability benefit over time to keep pace with inflation, ensuring that the insured person’s purchasing power remains stable.

Return of Premium (ROP): With this rider, if the policyholder remains disabled for the entire policy term and never makes a claim, they may be eligible to receive a refund of their premiums.

Future Purchase Option: This rider allows the insured person to increase their coverage in the future without the need for additional medical underwriting, ensuring their coverage keeps up with potential increases in income.

Disability insurance is a vital component of financial planning, providing essential protection for individuals in the face of unforeseen circumstances. By understanding the comprehensive coverage it offers, individuals can make informed decisions and choose disability insurance policies that best suit their needs. Whether it’s short-term or long-term coverage, one own occupation, or any occupation, disability insurance brings peace of mind, knowing that one’s income and financial well-being are safeguarded in times of adversity.

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Wellman Shew

Fresno resident Wellman Shew has worked in the California health insurance and employee benefits industries for many years as an entrepreneur & business leader