Disability is defined as any mental or physical illness or injury which prevents you from performing your regular or customary work. There are many forms of disability insurance including the common workers’ compensation insurance. Majority of employers must carry either the state mandated plan or a voluntary plan to covers employees for any on-the-job injuries.
Business Overhead Expense Disability Insurance
Business Overhead Expense (BOE) coverage is designed to reimburse a business for overhead expenses should the owner experience a disability. Eligible benefits include: Rent or mortgage payments, utilities, leasing costs, laundry/maintenance, accounting/billing and collection service fees, business insurance premiums, employee salaries, employee benefits, property tax, and other regular monthly expenses.
Employer-Supplied Disability Insurance
Since one of the top reasons for becoming disabled is getting hurt on the job, it is not surprising that the second-most important form of disability insurance is that provided by employers to cover their employees. There are several subtypes that may or may not be separate parts of the benefits package: workers' compensation and more general (but very basic) disability insurance policies.
High Limit Disability Insurance
Traditional Disability carriers have limitations on the monthly benefits that can be purchased, which limits the benefits for high income earners. Benefits will normally cap at $20,000-$25,000 of monthly benefits until you go to the High Limit Disability markets. High Limit Disability Insurance is designed to keep individual disability benefits at 65% of income regardless of the income level. Coverage is typically issued on top of coverage that is already in force. With High Limit Disability Insurance benefits can be anywhere from an additional $2,000 to $100,000 per month. Issue (one policy) and participation (other individual DI or Group LTD) has gone up to $30,000 with some companies.
Individual Disability Insurance
Those whose employers do not provide benefits, and self-employed individuals who desire disability coverage, may purchase their own policies on the open market. Premiums and available benefits for individual coverage vary considerably between different companies, for individuals in different occupations, and by State and Country. In general, premiums are higher for policies that provided more monthly benefit, pay the benefit for a longer period of time, and start payments for benefits more quickly following a disability. Premiums also tend to be higher for policies that define disability in broader terms, meaning the policy would pay benefits in a wider variety of circumstances. There are many web based disability insurance calculators to determine the disability insurance needed. Make sure your broker is very knowledgeable in Disability Insurance because sometimes the less expensive policy at purchase time can be the more expensive at claims time.
Key Person Disability Insurance
Key Person Disability Insurance provides crucial benefits for any functioning business to protect the company from financial hardship that may result from the loss of a key employee due to disability. Key Person coverage provides cash flow to help a company move forward and maintain a profit in the event a key employee becomes disabled. The company could use the disability benefits to hire a temporary employee should the disabled employee's prognosis appear to be a short-term disability. In the unfortunate circumstance of a permanent disability, benefits would then be used to help defray the costs related to hiring a replacement employee, such as recruitment, training, startup, loss in revenue and unfunded salary continuation costs.
Workers' Compensation
Workers' compensation (also known by variations of that name, e.g., workman's comp, workmen's comp, worker's comp, compo) offers payments to employees who are (usually temporarily, rarely permanently) unable to work because of a job-related injury. However, workers' compensation is in fact more than just income insurance, because it may pay compensation for economic loss (past and future), reimbursement or payment of medical and like expenses (functioning in this case as a form of health insurance), general damages for pain and suffering, and benefits payable to the dependents of workers killed during employment (functioning in this case as a form of life insurance). Workers compensation is a good benefit for on the job accidents but the weakness is the lack of coverage while not working. Statistics have shown that the majority of disabilities occur while not working and therefore not covered under workers compensation.
