Disability insurance provides an income when a person is unable to work due to a sickness or injury. Sometimes called the 'living death,' a disability can cause enormous financial hardship to families. One out of seven U.S. workers will suffer a disability lasting over 5 years before turning age 65. In addition to the increased bills incurred when caring for a disability, if the disabled person is also unable to work then a disability policy is crucial to provide for this lost income.
Disability insurance is usually divided into two types - short term disability (STD) and long term disability (LTD).
California State Disability Insurance (SDI) is state mandated coverage that is funded through employee payroll deductions. It provides for up to 52 weeks of benefits with a waiting period of only seven days. Any Illness or injury that is NOT work related is covered under this program. Benefits are commonly received by women during pregnancy and childbirth. Unlike disability coverage offered by insurance companies, SDI is non-exclusionary. Eligible workers cannot be canceled or denied because of health risk, pre-existing conditions or hazardous employment.
Employers generally provide LTD benefits for their employees, however many smaller companies do not offer this important benefit. LTD policies will pick up where STD policies such as California's SDI leave off. As the name implies, this coverage generally lasts to retirement age.