CARD T243
Short-Term Disability Insurance
Income protection for qualifying disability over a relatively short benefit period. It may cover the early months of an absence from work.
How it works
Short-term disability typically pays income for the early weeks or months of a qualifying absence. Waiting periods are often shorter than for long-term coverage, but exact periods and benefits vary. Coverage may coordinate with employer leave programs or state benefits. It does not ordinarily reimburse every medical bill or necessarily replace full salary. [19] [20]
A stated plan pays 60% of eligible weekly earnings after its waiting period for up to 13 weeks while disability qualifies.
Short-term refers to benefit design, not a promise that every illness lasts only a short time.
CARD T244
Long-Term Disability Insurance
Income protection designed for extended qualifying disability. It generally has a longer benefit period than short-term coverage.
How it works
Long-term disability is designed for extended income loss, commonly after a longer elimination period. Benefits may last for a stated number of years or to a specified age while eligibility continues. Many policies change occupational standards after an initial period and offset certain other income, such as specified Social Security benefits. Exact percentages, offsets, and durations follow the contract. [19] [20]
A plan’s stated $3,000 gross benefit is reduced by a $1,000 applicable offset, leaving $2,000 from that plan.
Long-term does not necessarily mean lifetime or payment in addition to every other income source.
CARD T245
Business Overhead Expense Insurance
Disability coverage reimbursing eligible ongoing business expenses when the insured owner is disabled. Rent and employee salaries may qualify under its terms.
How it works
Business overhead expense insurance reimburses eligible ongoing operating costs when the covered owner is disabled. Rent, utilities, and eligible employee salaries may qualify. The owner’s personal income, business profits, and new capital purchases are not automatically covered. Benefits are subject to actual eligible expenses and policy limits. It helps keep the business operating rather than financing ownership transfer. [19] [20] [31]
A business incurs $4,000 eligible rent and $2,000 eligible staff payroll during covered disability. With a sufficient limit and no other adjustments, reimbursement is $6,000.
Overhead expense protects operations; personal disability income protects the owner’s income.
CARD T246
Disability Buyout Insurance
Coverage helping fund purchase of a disabled owner’s business interest. It supports a buy-sell arrangement rather than ordinary operating expenses.
How it works
Disability buyout insurance helps fund a buy-sell agreement when an owner becomes disabled under its terms. It can use a longer qualifying or elimination period than personal disability income because the purpose is a lasting ownership transfer. Benefits may be lump sums or installments. Ownership, beneficiary structure, valuation, and the buy-sell agreement should align. [19] [20] [31]
Two co-owners arrange coverage to fund the agreed purchase of one owner’s interest after qualifying disability.
Buyout funding purchases equity; overhead coverage pays ongoing expenses.
CARD T247
Credit Disability Insurance
Coverage making specified debt payments while a borrower has a qualifying disability. Payments and duration follow the policy.
How it works
Credit disability coverage makes specified debt payments when a borrower has a qualifying disability. The creditor commonly receives payments applied to the debt. Waiting periods, monthly limits, maximum duration, and exclusions can leave remaining obligations. It differs from credit life, which responds to death, and from comprehensive personal disability income for all living expenses. [19] [20]
A covered loan payment is $400 monthly and the policy pays that amount for an eligible disability month under its limits.
Paying a covered debt installment does not necessarily replace the borrower’s general income.
CARD T248
Rehabilitation Benefit
A benefit supporting approved services that help a disabled insured return to function or work. Participation requirements depend on the policy.
How it works
A rehabilitation benefit supports approved services intended to help an insured regain function or return to work. It can involve vocational assessment, retraining, workplace modification, or other covered assistance. Insurer approval, a rehabilitation plan, expenses, and participation requirements depend on the policy. It is not automatic coverage for any chosen course or treatment. [19] [20]
An insurer approves job retraining under a disability rehabilitation plan and pays eligible costs within the benefit.
Rehabilitation assistance and the regular monthly disability payment are related but distinct benefits.
APPLY THE TERMS
Practice questions
Select an answer, then check it to see why each option is right or wrong.
T243 · Short-Term Disability Insurance
0 of 3 answered
T244 · Long-Term Disability Insurance
0 of 3 answered
T245 · Business Overhead Expense Insurance
0 of 3 answered
T246 · Disability Buyout Insurance
0 of 3 answered
T247 · Credit Disability Insurance
0 of 3 answered
T248 · Rehabilitation Benefit
0 of 3 answered
Sources & further reading
Original explanations and practice scenarios informed by the following regulatory, legal, and product resources. State examples are not presented as nationwide deadlines or requirements.