In general, disability insurance covers some of your income if something happens to you (like an illness or injury) and you can’t work.
The younger and healthier you are, the easier it is to qualify for a policy. But as you age, premiums increase. And if your health goes south, you may find it hard to qualify for an affordable policy at all.
But disability insurance doesn’t just cover freak accidents. Most claims are for things you may not realize are considered disabilities, like physical injuries, a heart attack, or cancer. These things could happen to anyone in any workplace.
There are two types of disability policies:
Short-Term Disability (STD) and Long-Term Disability (LTD):
Short-Term Disability policies - have a waiting period of 0 to 14 days with a maximum benefit period of no longer than two years.
Long-Term Disability policies - have a waiting period of several weeks to several months with a maximum benefit period ranging from a few years to the rest of your life.
Disability policies have two different protection features that are important to understand:
Non-cancelable means the policy cannot be canceled by the insurance company, except for nonpayment of premiums. This gives you the right to renew the policy every year without an increase in the premium or a reduction in benefits.
Guaranteed renewable gives you the right to renew the policy with the same benefits and not have the policy canceled by the company. However, your insurer has the right to increase your premiums as long as it does so for all other policyholders in the same rating class as you.