My Insurance Insider and Finance Blog

Image via WikipediaInterestingly most people aware of the importance of protecting their hard-earned assets, including their homes and autos. But somehow they neglect to protect their source of income that makes all these things possible. The social security system in America is far different to the generous safety net that most Europeans enjoy. So, why do you need long term disability insurance?

Private insurance coverage becomes vital to expatriates working in the US for compensating the loss of income by illness or disability. If someone becomes diabled and unable to perform the normal work, his accumulated wealth and ability to support his family will, at some point, be at risk.

Many employers automatically continue to pay salaries to employees for short-term disability with maximum beneficial period ranges 1-2 years and beyond this, employees are usually doing on their own. Here’s the necessity of Long Term Disability(LTD) that emerges in our life. LTD provides replacements of a share of their normal income should an accident or illness prevent them from working for an extended period.

Typical LTD insurance policies that available in the US market provide for payment of income benefits after a specific elimination period subject to certain modifications and optional extensions of coverage. Some of the main features and definitions commonly found in LTD insurance:

^^Disability: When employees are unable to perform their normal duties.

^^Elimination Period: A specified time-frame after a disability occures or before the benefit begins. This could range from 30-720 days.

^^Income Benefit: It renders basic disability coverage in case of injury or sickness that reduces work capacity and consequence loss of income(maximum 60% of the first US $100,000 annual income and 40% thereafter are usually available).

^^Catastrophic Protection Extension: When catastrophic injury or sickness disables a person that requires special care, it provides supplemental benefits upto a further 40% of annual income which when combined with the basic income benefit, can provide up to 100% replacement income.

^^Future Adjustment Option(FAO): It agrees to enhance coverage of a person when his salary increases or his Group LTD coverage is terminated or reduced due to change in employment.

^^Cost of Living Adjustment: It permits the adjustable income benefit to compensate the affect of inflation.

^^Savings Supplement Option(SSO): It allows the policy holder to help protecting an additional 10% of monthly earnings for compensating the lost savings resulting from LTD.

Standard LTD policies also contain special features designed for business owners.These allow-

**Overhead expenses coverage that pays for some specific office expenses.

**Recovery benefits that pay the owners who has returned to normal work.

**Key-person insurance that protects a firm against income loss resulting from disability of key employees.

**In case of jointly owned business, a disability policy disburses benefits to one partner of the business venture to buy a disabled partner’s share of business.