Disability Insurance: Policy that minimizes financial loss

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Disability insurance pays you (policy holder) an income if you become unable to work due to a disability resulting from an accident or illness. You may have thought about insuring your life, your health or your assets. But have you thought of insuring your ability to earn? Disability insurance gives you the scope to safeguard your income when you are not able to earn.

If you have a family that depends on your income you surely must have disability insurance policy to protect your earning capability. Studies have shown that an average human being has more chances of becoming disabled from an accident or illness than dying. So, it is not unusual that you too have a chance of becoming disabled.

What are the basic types of disability insurance?

You may take disability insurance for a long term or short term depending on your requirement and choice.
  • Short term disability insurance policies provide benefit for maximum 2 years and only after a waiting period of 0-14 days.
  • Long term disability insurance policies provide benefits that range from a few years to the rest of your life after a waiting period that ranges from several weeks to several months.

You may opt from the 3 basic types of disability insurance coverage:
  • Social Security Disability Insurance (SSDI): This federal government provided insurance is for workers with a disability that is diagnosed to last at least 12 months and does not allow them to earn fruitfully. SSDI needs the policy holder (you) to provide medical evidence for the disability. In addition, you are also required to match the medical listing set by Social Security Administration (SSA). Otherwise your residual working capacity will be taken into consideration. Benefits from Social Security include:
    • Monthly wage
    • Medicare
    • Vocational Rehabilitation (if the policy permits)
    • Other employment support programs

    Click here for more information.

  • Employer-Provided Disability Insurance: There are several companies that offer disability insurance policies as part of the employee benefit plan. For individuals who receive long-term disability protection, the benefits may rise up to 65% of the salary for 5 years or till the time the individual reaches the age of 65 years. Sometimes the benefits may also extend to your lifetime. If the premiums are paid by your employers then you will have to pay the taxes as levied on the benefits you receive.

  • Individual Disability Insurance: Self-employed individuals seeking disability insurance may find policies with the private health insurance companies. Such individual policies may be comparatively more expensive than group disability insurance policies and the premiums and benefits received largely depend on your occupation, state and country. With such a policy you may receive disability insurance benefits between 50% and 70% of your income compensated.
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How do insurance companies determine disability premiums?

There are quite a few factors that are considered while determining disability insurance rates. The factors include:
  1. Age
  2. Gender
  3. Occupation
  4. Susceptibility to disability
If you are involved in construction and work on fields or are involved in site works, you will be considered more vulnerable to injury and illness compared to others who stay inside the office for the entire day. Hence, if you have a lower risk of getting involved in accidents or falling ill, your disability insurance premiums will be low.

If you plan to get disability income insurance you must get it as soon as possible because the earlier you get it the better for you.

There are again 2 protection features of disability insurance:
  • Non-cancelable: In such a policy the insurance company cannot cancel the policy of the insured except when there has been a non-payment of premiums. You may get this policy renewed every year without your premiums being increased or your benefits being decreased.
  • Guarantee renewable: This policy guarantees the policyholder the ability to renew his policy and get the same benefits as before. However, premium rates may go up as decided by the insurance company and this holds good for all other policies in the same class.
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Is there a way to save money on disability insurance?

Yes, you can keep the cost of disability insurance down with the following 2 tips:
  1. Elect a longer waiting period before receiving benefits: You can lower your premiums if you can manage enough resources to cover your expenditure during the first 3 months of disability. So start saving.
  2. Elect a limited/shorter benefit period: This means that you will receive disability insurance benefits up to the age of 65 and not for a lifetime. But do not go for a benefit period that ends before normal retirement age. You might pay lesser premiums but again you will also find inadequate coverage when you need it most.
Ask your agent for disability insurance quote and make sure you have 3 to 4 quotations to compare and get the best offer.
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When can you claim disability insurance benefits?

Disability health insurance claims can be made if:
  • A disability arises due to unpredictable conditions. This means that your disability is not from an earlier known medical condition or a chronic illness.
  • You have a disability while you are at work and the disability arises as a result of any work related issue.
  • The waiting period is over.
To know about short term disability insurance claim click here.
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Who receives partial disability benefits?

Partial disability benefits are received by employees who are partially disabled. Partial here would mean an employee's inability to perform 80% of his normal work duties. In such a case, the remaining 20% of work that the employee can do will not be compensated.
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What are the benefits of disability insurance?

Benefits received from employer provided disability insurance as well as SSDI are:
  • Tax Benefits: If the premiums are paid by you using post tax dollars, then you need not pay any tax on the benefit amount.
  • Discounts: While there are employers who offer insurance at a discounted rate, there are others who offer short-term insurance for free and at the same time give employees the option of choosing long-term insurance on discounts.
Benefits are paid one month in arrears. An individual may receive benefits as long as he/she continues to be disabled or meets eligibility requirements. The beneficiary will, however, be reviewed to see if there is any improvement in the condition. This will in turn determine whether he/she still is eligible to receive the benefits.

If you can anticipate the probability of being disabled due to any reason, it is best that you get yourself covered under the disability insurance policy. Ask your agent to explain the policy to you in details. Sometimes a general policy may not cover a critical illness. Purchasing add-on policies at times like these always help. So assess your risks and invest for your future.
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PostPosted: Mon Sep 17, 2007 11:14 am   Post subject: Disability Insurance: Policy that minimizes financial loss  

Hi, I'm curious about disability coverage. What do they normally covered? Will they cover partial disabilities? Is it a wise purchase when we have social security disability benefits? Tim k Wallace


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PostPosted: Mon Sep 17, 2007 11:40 am   Post subject:   

Hi Tim,



Disability insurance coverage will compensate you for the income loss if you suffer any permanent disability. Normally, they start paying off the benefits after a certain time period, known as ‘elimination' or ‘waiting period'. According to their definition, you need to suffer from physical condition that will restrict you from performing your daily works and your job. Once you have become disabled the insurance will pay out 70%-80% of your income as compensation. The benefits may continue from six months to years depending upon your situation.



Hope this information will be of some help.



Regards,

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PostPosted: Mon Sep 17, 2007 11:42 am   Post subject:   

Good morning Tim,



Do you mean the disability insurance coverage that you can purchase from your employer? Or a private policy? I personally think they are a good idea and my husband and I both have purchased the max thru our employers. And have been thinking about buying a private policy as well.



SS disability is generally not as high as what you can buy privately, (dependent of course on your salary). The policy I have at work is a full 60% of my salary, for both partial and full disability, (the full disability pays that amount until I would reach retirement age...12 years, 8 months and a couple of days! not that I'm keeping track or anything! Laughing) . These policies are typically very inexpensive, and I think well worth the money. We never know what could happen at any moment.

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PostPosted: Mon Sep 17, 2007 11:50 am   Post subject:   

Hi Tim, please don't depend on social security disability insurance coverage benefits alone. The eligibility criteria are very strict and over 70% of the applicants fails to satisfy them. On the other hand, private disability coverage policies offer wide range of benefits (I'll second lori on this matter). It is always a wise bargain to add a disability policy to you portfolio. Coloradoblitz


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PostPosted: Mon Sep 17, 2007 10:50 pm   Post subject:   

You are right Lori- it is well advised to use the disability at your work. I had to do this, I had the temporary and the permanent.



I got realy sick, and it payed for itself, had I not had it, I would have been in trouble financially.



A friend of the family, who was 32 years old was questioning whether at her age to get this through her employer. I spoke with her and described what could happen- she also has 3 kids, and she took it.



A few years down the line, she got really sick- remained in the hospital for 3 weeks, and then had to have home health care come out. It doesn't matter how old or young you are- you never know!!..KAren



My dad, who was in insurance for 38 years always told me that it was better to pay now, than have to later- and cheaper too!!

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PostPosted: Tue Sep 18, 2007 12:09 am   Post subject:   

Your Daddy was a wise man Karen.

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PostPosted: Tue Sep 18, 2007 4:25 am   Post subject: Quite correct!  

Hi you're quite correct at saying that we should 'pay now', rather than pay late...since not only the premiums...sometimes its the nature or need of the coverage that also changes with time...for instance say at the age of 30 I'd go for a health coverage but by the turn of 50 or 60 I may choose to go for a long term care coverage since it would cover me for more...& see how the premium would change for such coverage...but then to my mind it would seem quite useless to opt for a brand new health program! Smile

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PostPosted: Tue Sep 18, 2007 7:04 pm   Post subject:   

Hi Tim,



Great question, and a lot of answers! Here are some basics regarding Social Security Disability Income, or "SSDI."



First of all...good luck. In order to qualify for SSDI, you must meet their eligibility criteria:

1. The disability must be expected to result in death or last at least 12 months.

2. There is a 5-month waiting, or "elimination" period starting on the date of disability, with benefits payable on the 6th month if accepted.

3. You must be both "fully" and "disability" insured throught the S.S. system in order to be eligible. (another discussion).

4. You are at the mercy of your case worker. S.S. says that you must "be unable to find substantial employment in the entire national economy."



Individual and group contracts also have elimination periods, primarily for Long-term disability contracts. Watch for the language within the policy that determines how you qualify for the benefits. There are absolutely different terms that are defined differently in D.I. policies:

"Own Occupation" contracts state that you are eligible for benefits if you cannot perform one or more of the duties of your own occupation.

"Reasonably Suited" policies say that if by reason of experience, education or training you can find substantial employment, then you are not disabled under the policy's terms and will not receive benefits.

"Any Occupation" contracts say that if you can find "any" substantial employment, you will not receive benefits under the DI policy.



These, and more, are critical considerations. Same with both Short and Long term DI contracts. STD normally provides benefits for one year or less. LTD policies commonly provide benefits for 2 years or longer.



There are also tax considerations if you actually receive benefits, depending on who and how the policy was paid for. If you are looking for one single reason to purchase, consider this: you are 7 times more likely to become disabled before age 65, and one person out of five will suffer a disability that lasts 5 years or longer. Kinda scary!



If you need anything else, let the forum know...we'll be happy to help!



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PostPosted: Wed Sep 19, 2007 10:39 am   Post subject:   

BRAVO ! InsTeacher, I learned about on that post ! thanks.
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PostPosted: Wed Jul 02, 2008 11:39 am   Post subject:   

Quote:
If you are looking for one single reason to purchase, consider this: you are 7 times more likely to become disabled before age 65, and one person out of five will suffer a disability that lasts 5 years or longer. Kinda scary!




Well, I've some more figures that may be of some interest to you......



  • around 43% of the men population may suffer serious disability during their working years, and may require assistance for a longer period of time.

  • The chances of becoming disabled for a person is high at the young age.

  • Under the age of 35, every one out of three individuals are likely to suffer from disability for at least six moths during their career.

  • women are prone to disability at their late age, as they live longer than the men. Around 54% of the women population are the risk of disability.





Sorry, if I've made this thread even more scary to the readers. Embarassed

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PostPosted: Sat Feb 27, 2010 6:36 am   Post subject: LTD-DI/own occupation/UI  

I have (unfortunately) had to file for private LTD/DI via an employer plan due to a permanent medical issue/disability that prevents me from performing my specific job/occupation successfully.



The LTD/DI policy is specific to 'own occupation' and does not prohibit working or attempting work in another occupation while receiving LTD/DI benefits. I feel that I 'may' be able to at least try to work in another occupation where my medical issue 'may' not be as much of an issue (unsure, but willing to try).



In this case, could I:



1) file for/receive Unemployment benefits, while

2) attempting to locate work in 'another' occupation for which I may be qualified, and

3) continue receiving my LTD/DI benefits?



I need to add the caveat that I may NOT be able to succeed in 'another' occupation either (due to my medical issue) but I have worked all my life, miss working and am in my early forties.


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PostPosted: Sat Feb 27, 2010 1:20 pm   Post subject:   

Quote:
In this case, could I:



1) file for/receive Unemployment benefits, while

2) attempting to locate work in 'another' occupation for which I may be qualified, and

3) continue receiving my LTD/DI benefits?
no, I doubt it, well let me take that back..you might be able to drop the DI and pick up unemployment for a breif period..you cannot collect both...and my bet would be if you do go to work in another profession, and then didn't succeed, you'd have a hard (perhaps impossible) time getting your DI back.


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PostPosted: Sun Feb 28, 2010 4:48 am   Post subject:   

Filing for unemployment isn't necessary. You have disability insurance and as you've stated you have a policy that provides "own-occ" coverage. The big question is how own-occ is it? Confusing you bet. Own-occ is supposed to give you the ability to receive benefity when you lose the abililty to perform the material and substantial duties of you own-occupation even if you can perform such duties of a different occupation.



Meaning it would be perfectly reasonable to attempt to secure employment elsewhere and still receive a check from your disability insurance company. Some companies issue policies that are modified own-occ, meaning that they include the stipulation that you cannot be employed if you are to receive a check from the disability company. You'll want to make sure that this is not the case for you.



Since this is an employer plan the most likely scenario is that you have a short period of pure own-occ coverage if any, say the next 2-5 years. This means after this period you will no longer have own-occ coverage and the policy will either eliminate or change to modified own-occ or (more likely) any-occ, which defines disability as your inability to perform the material and substantial duties of any occupation for which you are appropriately licensed, educated, trained, etc.



So to recap, you should be find getting some other form of employment while on claim so long as the policy truly offers pure own-occ coverage. You can check with the carrier to get the answer. You can also tell us who the carrier is and we can give you an idea as to whether or not it's likely you have pure own-occ or modified own-occ.

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PostPosted: Mon Jun 14, 2010 8:00 pm   Post subject: Key Man disability coverage  

I am curious about getting Key Man disability insurance for my start-up business. I am looking to have $1 million of coverage. My research tells me that I would probably have to pay several thousand dollars annually for this coverage. Can you give me a little more info on how much I should expect to pay? Thanks!


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PostPosted: Sat Jun 19, 2010 10:23 am   Post subject: Disability  

Heres the situation. My husband ruptured his achilles heel in Oct. 2009. He visited the E.R. and they told him to see a specialist. he hasnt been to see a DR. yet. His calf and ankle are getting worse everyday, he cant walk have the time and is still working. He is in constant pain and swelling. He doesnt have any kind of Insurance thru work or any other affiliation. My ? is can he apply for disibility thru Social Security so we will have income and he can have his surgery and physical Therapy? Need answer ASAP Thank u

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