If you rely on income from a job to pay your bills, imagine what would happen if a long-term illness or injury prevented you from working. Without another means of support, it would be a struggle to keep up with financial obligations. This is where disability insurance can provide peace of mind. The following guide highlights how the coverage works and the benefits it offers.

What Is Disability Insurance?

This type of insurance replaces part of your wages if you become ill or injured while away from work. Depending on the policy, disability insurance provides you with a certain percentage of your income each month. The amount can range anywhere between 50% to 75%.

Payments to the policyholder are capped at a certain maximum amount. That figure depends on the premiums you pay to participate in the disability insurance plan. While coverage can be offered by employers, individuals may also purchase private coverage on their own.

In order to qualify to receive disability payments, the injury or illness must provide documented proof of your inability to return to work. There is typically a waiting period, which varies based on the policy, for when you will start to receive payments.

What Are Its Benefits?

Disability insurance gives you additional income while you’re unable to work due to an illness or injury. The policies are available in short and long-term increments. Short-term coverage is generally available for up to a year and can provide as much as 80% of income replacement. Long-term coverage can range from two to 10 years. Some plans may offer insurance replacement until you retire. Most of these policies replace between 50% to 80% of your net income.

You can use the disability payments as you wish, including to pay towards a mortgage or rent, car loan, credit card debt, and other expenses. The benefits are tax-free, which means policyholders won’t have to pay taxes on the distributions.

With a financial cushion in place, you can have additional income to help pay your bills. Southern Insurance Associates in Hixson, TN, is the trusted resource small to medium-sized businesses turn to for comprehensive disability insurance plans. Serving Tennessee, Alabama, and Georgia, the agency represents more than 70 insurance companies so that you have a wide range of coverage options to choose from. To learn more about setting up disability insurance at your company, call (423) 296-0626. Visit the website for details on the full suite of services.