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Disability Insurance(Download Free Healthy Living Guide)When a person becomes disabled and is no
longer able to work, at some point their income will stop.
Unfortunately, daily
living expenses continue. Disability
income insurance policies are available to continue a portion of the
disabled
person’s income while they are unable to work. Unfortunately most people
pay more attention to life insurance than they
do about an income replacement policy should they become disabled. Here are your disability odds
calculated by
the Cornell University Rehabilitation Research and In the year 2004,
an estimated 7.9 percent (plus or minus 0.2 percentage points) of
civilian
non-institutionalized, men and women, aged 18-64 in the Persons with a disability are those who have a "health problem or disability which prevents them from working or which limits the kind or amount of work they can do." Disability income insurance is available individually or sometimes as a portion of a group benefit package provided by an employer. Individual policies are very often sold to self-employed and professional people. The benefit amounts relate to earnings and is matched as closely as possible to policy owners after tax income as possible. Usually it's equal to 60% of monthly net income and there's a limitation on the amount. When disability coverage is included as part of a employee group benefit package, the disability income policies are usually more liberal than individual plans regarding limitations and exclusions. It's also much easier to qualify for coverage. Generally, group plans are less costly to all parties. Disability income insurance protection should be a part of sound financial planning. Whatever your situation may be, disability is one of the most important factors when you consider your inability to work and produce income. Consider the following to determine the coverage you need:: What is the minimum amount of money you can get by on if your income stops? What are your retirement needs if you can no longer work and pay into retirement funds? Allow for any benefit that might be offset by social security and workers compensation. Insurance policies have a section labelled
"Definitions" and it's
important to read it carefully. The
definition of "total disability" needs to be discussed.
That definition is crucial as it's always
defined in the policy and insurance companies may use different
definitions. Interpretation
is important as it pertains to
the insured’s own occupation and any occupation the insured
may be qualified to
perform.
Total
disability The
first method,
concerns the normal occupation of the
insured. In this
instance total
disability might be defined as “the insured’s
inability to perform any or all
of the duties or his or her own occupation,” and is
determined by the insured’s
occupation at the time that disability begins.
The
second method,
more restrictive and defined as “the
insured’s inability to perform the duties of any occupation
for which he or she
is reasonably qualified by education, training or
experience.”- Simply stated,
you may no longer be able to conduct the duties of your current
occupation, but you may be able to perform
activities
in a related field. Some disability income policies use another criterion to classify total disability. This is termed presumptive disability and automatically qualifies the insured for a total disability classification. These conditions are: Loss of use of any
two limbs  Presumptive
disability may also be
determined by a loss of income test.
If
the earnings after disability drop significantly below pre-disability
earnings
by a stated percentage, the insured may be classified as totally
disabled. There are short-term
policies that cover non-occupational disability but most
long-term policies cover both occupational and non-occupational
sickness and
accidents. Normally
occupational
benefits are reduced by benefits received form workers compensation and
social
security.Other limiting factors may be a probationary period,
elimination period
and the benefit period. Some disability insurance policies use a probationary period which begins when a policy goes into effect and benefits will not be paid during this period. These terms vary policy to policy, but the probationary periods are often 15 or 30 days and sometimes up to 60 days for long-term policies. Additionally, the probationary period in some policies also includes an elimination period. That begins when the policy goes into effect and can last for any length of time, even up to a full year. Usually this is left to the insured to decide as it's based on how long the insured can go without income after becoming disabled. Low
premiums are the primary advantage to a
long probationary period and that allows the insured to use premium
dollars to
purchase a benefit that best suits their needs. The benefit period, the time over which you
can receive benefits, can vary depending on the needs of the insured. It can be as short as 13
weeks or up to the
age of 65. The general rule is the longer the benefit period, the
higher the premium. As
with everything else in life, we get what
we can pay for. Benefit amounts for both short-term and long-term policies vary from 50% to 66 2/3% of earnings with a cap on the maximum amount to be paid. Additional disability categories are confining vs. non-confining, partial, residual, recurrent, delayed, combined accident and sickness and non-disabling. Be aware of their existence and check your policy for a definition of coverage for these types of disability. It is important to discuss the following
items as well as any previously mentioned with your agent: Supplemental income - often called an additional monthly benefit rider, provides additional income amount during the first several months of a long-term disability. Hospital income - pays a stipulated amount per day when hospitalized for a certain period and can be up to 12 months. Elective benefits or indemnities - provide lump-sum payments for certain injuries like fractures, dislocations, sprains or amputations and is elected by the insured in lieu of weekly or monthly benefits stated in a contract. |
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