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Disability Insurance: Why You May Need It in a Car Accident

Disability insurance covers your wages if you are out of work due to injury or disability.  Most people do not generally think of disability insurance as car insurance. However, since car accidents can result in disability, you may want to consider purchasing disability insurance along with your car insurance.  If you are in a serious accident in which you become disabled, even temporarily, you’ll be glad you have disability insurance.

>>MORE: What Happens When You’re in a Car Accident With No Insurance

What Does Disability Insurance Cover?  

Disability insurance covers a portion of your salary or typical wages if you are out of work due to injury. This includes total disabilities, partial disabilities, injuries and illnesses, both short and long term.  Pregnancy and childbirth are also included in many disability insurance plans.

>>MORE: What Does Health Insurance Cover in Car Accidents?

What Are the Different Types of Disability Insurance?

Disability insurance coverage encompasses a variety of different types of disability coverage.  The type of disability coverage available include long-term disability insurance, short-term disability insurance, mortgage disability insurance, supplemental disability insurance, social security disability insurance, state disability insurance, worker’s compensation, and self-insurance.  Both short-term and long-term disability insurance are options which may cover your expenses if you are out of work due to a car accident.

Worker’s compensation only covers injuries which occur at work.  Self-insurance is actually your personal set aside savings. Therefore, these two types of insurance do not apply to car accidents.

>>MORE: How Much Will My Insurance Go Up After An Accident?

Long-Term Disability Insurance

Long-term disability insurance gives you monthly payments if you become either partially or completely unable to work due to an accident.  The period of time that long-term disability insurance covers can range from two years to your retirement, depending on how much coverage you purchased and how long you need it.  Insurers recommend purchasing 5 years or more depending on what you can afford. This insurance will cover up to 60% of your pre-tax income before the disability occurred. This is generally the amount that insurers recommend and will equal approximately 100% of your current take home pay.  You also want to opt for a short waiting period if possible.

>>MORE: What Is Accident Forgiveness, Should You Get It and Who Offers It?

How Much Does It Cost?

You can get long-term disability coverage for approximately 1% to 3% of your annual income. This means that if you make $50,000 a year, long-term disability coverage expenses can range from $500 to $1,500 a year.

Types of Long-Term Disability Insurance

The two primary types of long- term disability insurance are 1) Any Occupation disability insurance and 2) Own Occupation disability insurance.  

You can receive Any Occupation disability insurance benefits if you cannot work any job that the insurer considers to be reasonable for you.  (It is important to find out what types of jobs these are when securing this type of insurance.)  

Own Occupation disability Insurance, on the other hand, pays out if you cannot work in your regular profession due to injury. Insurance companies offer three types of Own Occupation disability insurance which include 1) True own occupation, 2) Transitional own occupation, and 3) Own occupation, not engaged.  True own occupation benefits pay out even if you get another job so long as it’s not in your own occupation. For this reason, insurers charge you more for this type of disability insurance.  Transitional own occupation benefits pay the difference between your own occupation and what a job outside of your occupation pays.  Own occupation, not engaged benefits pay out until you start a new job in any profession.

To get a cheaper rate on long-term disability insurance, you should purchase it while you are younger and in good health.  Furthermore, you should make sure that it is non-cancelable so that you will have it when you need it.

>>MORE: How To Get A New Car After A Total Loss Accident?

Short-term Disability Insurance

Short-term disability insurance differs from long-term disability insurance in that it is only for a short period of time, up to a year.  These policies are often offered through your employer. Because the waiting period can be as short as a few weeks, short-term disability insurance can be used to cover the gap between the time which the injury occurs and the end of the waiting period for your long-term disability insurance.

State disability insurance is similar to this type of insurance and is offered by certain states.  The states of California, Hawaii, New Jersey, New York, and Rhode Island offer this type of insurance.  

Other Insurance

Mortgage disability insurance and Business overhead expense disability insurance cover your mortgage payments and your business overhead expenses respectively should you become disabled.  Business overhead expenses include expenses such as rent, salaries of employees, utilities, and more. However, neither one of these types of insurance will cover your own salary.

Supplemental disability insurance coverage a disability plan offered by your employer.  This type of plan gives you the money that you need above what your employer’s plan pays out.

Social security disability insurance is federal disability insurance.  Most people who apply for these benefits are denied and the average recipient receives approximately $1,000 a month.  Thus, you would be far better off purchasing private disability insurance.

>>MORE: Umbrella Insurance: What It Covers, How Much It Costs, and Where to Buy

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