Easy Guide To Disability Insurance
Listen To Our Audio On Disability Health Insurance:
We all know how important typical health insurance is, but did you know that disability insurance is just as important? In the event that you are hurt on the job, and cannot work, disability insurance will give you peace of mind-you will still able to provide for your family. While we would like to think that we always work safely, accidents do happen and you need to be sure that you have every angle covered in the event of an accident. If you become ill or injured on the job and as a result you are unable to return to work, there are a couple of options that will replace lost income. These types of disability insurance are not going to fully replace your income because they want you to have an incentive for returning back to work once you get well.
Social Security Benefits
Social Security benefits are paid to you when your disability is expected to last for at least 12 months. Most of the time this is when no gainful employment can occur and you must remain out of work for the entire duration of your leave. Employer-paid disability is required by almost every state in the United States. This type of disability insurance is deducted from your paycheck, and is there for you in the event of an accident. When you are looking at disability insurance policies, it is important to understand what they mean. While the two available policies are both for disability, they both cover a different amount of time you will be covered, and when you will start receiving your compensation.
A short-term disability policy means that you will be covered for no longer than 2 years. With this policy you may have to wait up to 14 days before you start receiving compensation. A long-term disability policy is a little different. The disability compensation will not kick in for several weeks, sometimes a couple of months. However, long-term disability will cover you for a longer period of time, and sometimes for the rest of your life.
Along with having the two different types of insurance policies, there are also two different protection features. Protection is offered to you to ensure that you are not going to be treated unfairly due to your inability to work. Non-cancelable means that for no reason other than not paying your premiums can your policy be canceled. With this type of policy you will lock in your premium and will not risk a decrease in the benefits. On the other hand, a guaranteed renewable policy means that the same benefits will be available every year. The only way that your premium will be increased is if every policyholder within the same rating class as yourself increases also.
While there are many options when choosing disability insurance as well, these are the most popular selections. It is important to discuss all available options when choosing a disability insurance policy to ensure that you know what you will receive in the event of an accident or illness. Research your options to find the best choice for you and your family.
More Information On Disability Insurance:
When a person becomes disabled and unable to work, at some point their income will stop. It might be sooner or later, but unfortunately, life goes on and daily living expenses continue to mount.
Disability income insurance is available to continue at least a portion of ones income while unable to work. It’s sad, but most people give more attention to life insurance than they do about income replacement should they become disabled.
Disability income insurance is available individually or sometimes as a portion of a group benefit provided by an employer in their group package.
Individual policies are most often sold to self-employed and professional people. The amount of the benefit relates to earnings and is matched as close to after tax income as possible. Generally it is up to 60% of monthly net income and there is usually a cap on the amount.
When included as part of a employee group benefit package, disability income policies are usually more liberal than individual plans as far as limitations and exclusions. It is also much easier to acquire coverage. As a general rule, group plans are much less costly to all parties.
Disability income protection should be an element of your entire financial planning. The importance cannot be overestimated because it relates to your overall family finances. Whatever you situation may be, disability is one of the most important factors when you consider your inability to work and produce income.
Some things to consider when determining disability income needs are:
Establish the bare minimum required if income stops.
Determine your retirement needs if work ceases and the ability to pay into the retirement ends.
Allow for any benefit that might be offset by social security and workers compensation.
Understanding The Terms And Conditions
Some thought needs to be afforded to the possibility of “total disability.” That definition is important as it is always defined in a policy and different 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.
The first method used to determine total disability concerns the occupation that the insured is normally engaged in. In this case total disability might be defined as “the insured’s inability to perform any or all of the duties or his or her own occupation.” This is determined by the insured’s occupation at the time that disability begins.
The second method is more restrictive 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.”
In other words, while you may no longer be able to conduct the duties of your current occupation you may be able to perform activities in a related field.
There are some disability income policies that use another criterion to classify total disability. This is called presumptive disability and automatically qualifies the insured for total disability classification. These conditions are:
- Loss of use of any two limbs
- Total and permanent blindness
- Loss of speech and hearing
Presumptive disability may also be decided by using a loss of income test. If the earnings after disability significantly drop below pre-disability earnings by a given percentage the insured may be considered totally disabled.
Usually short-term policies cover non-occupational disability but most long-term policies cover both occupational and non-occupational sickness and accidents. Bear in mind, however, that occupational benefits are usually reduced by benefits received form workers compensation and social security.
Other considerations are the probationary period, elimination period and the benefit period.
Some disability policies use a probationary period that begins when a policy goes into effect and no benefits are paid during this period. It varies but is often 15 or 30 days and sometimes up to 60 days for long-term policies.
In addition to the probationary period some policies also include an elimination period. It begins when the policy goes into effect and can last for any length of time even up to a full year. This is usually left to the insured to decide as it is based on how long the insured can go without income after becoming disabled.
The primary advantage to a long probationary period is a low premium and allows the insured to use premium dollars to purchase a benefit that best suits their needs.
The benefit period, which is the length of time, can vary depending on the needs of the insured. They can be as short-term as 13 weeks up to long-term as long as age 65.
As a general rule the longer the benefit period, the higher the premium. Same as everything in life, we get what we pay for.
Benefit amounts for both short-term and long-term policies range from 50% to 66 2/3% of earnings with a cap on the maximum amount to be paid.
Other disability categories are confining vs. non-confining, partial, residual, recurrent, delayed, combined accident and sickness and non-disabling.
We won’t cover definitions of each category here, but do be aware of their existence and check your policy for a definition of coverage for these types of disability.
Most companies offer optional short-term benefits for an additional cost. A typical disability income policy might include all, some or none of the items below so it is important to discuss these with your agent. These options are:
Supplemental income – sometimes called an additional monthly benefit rider, provides additional income during the first several months of a long-term disability.
Hospital income – pays a stipulated amount per day when hospitalized extending for a certain period and can be up to 12 months.
Elective benefits or indemnities – provides lump-sum payments for certain injuries like fractures, dislocations, sprains or amputations of toes or fingers and is elected by the insured in lieu of weekly or monthly benefits stated in a contract.