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Disability Insurance |
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Most people typically think of insurance coverage for their home, car or medical needs. However, we forget that what allows us to afford these items is our employment income and without earning potential it would quickly become impossible to maintain your home and provide for your family. That is why disability insurance is so critical because it protects your income. Physical disabilities can be overcome with the right care, physician, support and ability to cover your financial needs. If you feel your situation can be helped through a state or federal disability insurance program you may want to visit social security at; http://www.ssa.gov/disability/
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Disability Insurance Policy Components |
Component | Description |
Benefit Amount | This feature is the amount that the policy will pay to you should you become disabled. |
Benefit Period | This will define how long benefits will be paid. It could be 5 years or until age 65. The length of benefits paid will be directly proportional to the cost of the policy. |
Definitions of Disability | There are two general types of disability definitions that you should be aware of.
- Own Occupation, or "Own-Occ" which states that in order to be declared disabled you cannot perform your particular occupation. Typically this would be the best as your earning potential will be greatest with your career skills.
- Any Occupation, "Any-Occ" which would stipulate that you are unable to perform any occupation.
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Definition of Disability in Your Policy | This is an important part of any policy. Be sure you fully understand how disabled will be defined. As noted above, being unable to perform your present occupation is what you want. |
Guaranteed Future Insurability | This feature allows you to increase your policy amount in the future as your income grows without having to formally reapply. |
Guaranteed Renewable Policy | This type of policy is guaranteed as renewable, as long as the premiums are paid, but the premiums can be raised for a class of policyholders through regulatory state approval. |
Inflation Protection | Having this in your policy, which is typically offered as a rider, will factor inflation into your paid benefits. This should be seriously considered, as a monthly amount now will be quite different in value 20 years from now. Inflation riders are generally offered in two forms.
- Simple - the monthly benefit identified in the policy is applied to an inflation factor
- Compound - the inflation factor is applied each year to last year's amount.
Inflation effects your expenses in a compound fashion. This means that the only way to stay with inflationary forces is with a compound inflation rider. |
Long Term Disability | This product would pay benefits up to age 65. |
Non-Cancelable Policy | This type of policy will be guaranteed renewable, as long as the premiums are paid, and will have premiums that cannot be raised. It is often referred to as a, "Non-Can" policy. |
Partial Disability Benefits | With this type of policy you would be paid a certain amount for a defined period of time when declared disabled. |
Residual Benefits | With this type of policy you would be paid benefits that are proportional to your loss of income. |
Short Term Disability | This would pay benefits for a specific period of time, for example 2 years. |
Waiver of Premium | This feature allows for the premiums that you pay to be waived upon receiving benefits. |
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Common Misconceptions |
"I am in good health, I know I can earn a living."
This is a common misconception. People can become disabled in many ways; workplace injury, car accident or the onset of a debilitating medical condition. Statistically between the ages of 35 and 65 seven out of ten people will become disabled for three months or longer.
"Won't Social Security help me?"
Social Security benefits are extremely difficult to qualify for and take a great deal of time to finally start. You must prove that not only are you incapable of performing your usual occupation but any occupation. In addition, the benefits most likely will not meet your financial obligations. The maximum payment for a 30-year-old earning $70,000.00 per year is $1,600.00 per month.
"What about employer provided group disability or worker compensation coverage?"
Workers compensation only covers individuals that have been injured on the job and those benefits are typically quite low and do not come close to covering your earnings. Group disability plans through an employer are not prevalent, less than 41% of companies with over 100 employee's and less than 19% of companies with under 100 employees provide this coverage. Also these benefits will not be adequate to replace income.
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You were true to your name and helped me save so much money!
- Barbara Wilson - Troy, NH |
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The agent helped me decide what coverage I needed. Thanks!
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I got straight answers to my questions and no high pressure sales speak.
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