Do Any Disability Income Insurance Companies Offer Temporary Disability Insurance as is Common With Life Insurance?

The authors are not aware of any companies that offer temporary disability insurance. Upon reflection, at least one reason such insurance plans are rare or nonexistent seems pretty obvious. With health insurance coverage, such as when people are between jobs, or even one-year or other shorter-term life insurance policies (which are typically renewable and convertible into long-term permanent policies), the risks to the insurer can be high, but manageable and predictable, with the potential for temporary buyers to become purchasers of long-term continuing coverage policies.

With a temporary disability plan, the policy would remain in force for only a temporary period, say until the prospective insured’s employer establishes a LTD plan in the coming year. So the insured would be planning to keep the policy in force and pay premiums only for a year or so. However, with disability income insurance the risk generally is extremely long term, because a disability occurring during the temporary, premium-paying period while the policy is in force could involve the insurer having to make benefit payments replacing 50 percent, 60 percent, or more of the insured’s earnings for many years, until the insured reaches age sixty-five, usually. It would be hard for the insurer to even design a plan with low enough premiums to make a temporary plan feasible.

However, a few insurers (Guardian, for example) offer a slightly different product, called a short-term disability program, in most cases involving group disability insurance sponsored by employers. More insurers also offer what is called supplemental disability insurance which is designed to be an additional tier of coverage on top of a primary disability income policy, which the employer usually provides.

Reproduced with permission.  Copyright The National Underwriter Co. Division of ALM

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