What is Disability Insurance?
Your ability to earn a living is your most important asset. Think of Disability Insurance as an insurance plan for your paycheck. It provides a substitute income to cover the costs of your bills when you are ill or physically injured and you cannot work. Without disability insurance, you might need to use your savings to pay the bills if you are injured and cannot work - which may have long-term consequences that may be difficult to recover from. Most people set aside money and save for new appliances, college, or other investments, but rarely for unexpected things such as medical emergencies or events that could disallow you from working for a period of time.
If you ever become ill or injured and cannot work, the benefits of disability insurance far outweigh the costs of any premium you may be paying.
What are the types of disability insurance?
There are two types of disability policies: Short-Term Disability (STD) and Long-Term Disability (LTD):
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Short-Term Disability policies (STD) have a waiting period of 0 to 14 days with a maximum benefit period of no longer than two years and is typically a provided as part of an employer-sponsored group benefit program. A waiting period can be thought of a deductible, but in terms of time rather than dollars.
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Long-Term Disability policies (LTD) have a waiting period of several weeks to several months with a maximum benefit period ranging from a few years to the rest of your life.
Disability policies have two different protection features that are important to understand.
1. Non-cancelable means the policy cannot be canceled by the insurance company, except for nonpayment of premiums. This gives you the right to renew the policy every year without an increase in the premium or a reduction in benefits.
2. Guaranteed renewable gives you the right to renew the policy with the same benefits and not have the policy canceled by the company. However, your insurer has the right to increase your premiums as long as it does so for all other policyholders in the same rating class as you.
In addition to the traditional disability policies, there are several options you should consider when purchasing a disability insurance policy:
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Additional purchase options
Your insurance company gives you the right to buy additional insurance at a later time.
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Coordination of benefits
This can be a way to reduce the cost of disability insurance. The amount of benefits you receive from your insurance company is dependent on other benefits you receive because of your disability. Your policy specifies a target amount you will receive from all the policies combined, so this policy will make up the difference not paid by other policies.
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Cost of living adjustment (COLA)
The COLA increases your disability benefits over time based on the increased cost of living measured by the Consumer Price Index. You will pay a higher premium if you select the COLA.
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Residual or partial disability rider
This provision allows you to return to work part-time, collect part of your salary and receive a partial disability payment if you are still partially disabled.
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Return of premium
This provision requires the insurance company to refund part of your premium if no claims are made for a specific period of time declared in the policy.
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Waiver of premium provision
This clause means that you do not have to pay premiums on the policy after you’re disabled for 90 days.
At Insurance Planning Service, we know that’s a lot to think about, but we can walk you through the process and help you find the options that best fit your needs.
Getting a quote for DISABILITY INSURANCE is quick and easy! CALL US or CLICK HERE to fill out our secure on-line quote form and we will do the rest!