Disability Insurance: Policy that minimizes financial loss

by Guest » Mon Sep 17, 2007 11:14 am

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.

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.

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.

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.

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.

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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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

Total Comments: 64

Posted: Sat Feb 27, 2010 01:20 pm Post Subject:

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.

Posted: Sun Feb 28, 2010 04:48 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.

Posted: Mon Jun 14, 2010 08:00 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!

Posted: 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

Posted: Thu Jul 01, 2010 10:16 pm Post Subject: Sscial Sucurity

Yes he can apply for Social Sucurity. Anyone who is considered disabled and unable to work can surely get SS Income. It would be required for SS standards to see a doctor it will only cost you a visit. When I went to the vision Dr he wrote my perscription down then I showed it to SS. His doctor will do something similiar. oh yes tell his doctor that this is the initial reason for seeing him he will help even more I hope that this helped. Good luck things will look up

Posted: Tue Aug 31, 2010 07:21 pm Post Subject: Disability Ins.

At my job where I worked for 9 + 1/2 years there was an employee who was a bully. After trying to flee her tyrany for many years I was granted reprieve. She then was allowed to follow me to my new shift. I suffered greaty depression and anxiety at the thought of her outburst. I began having panic attacks due to her aggressive loud nature. I complained to the EEOC with no results. She was interfering with my work performance. I left during an altercation due to a panic attack. I was fired basically for having a panic attack. Is this not claimable under my long term disabililty insurance?

Posted: Sat Sep 04, 2010 12:55 pm Post Subject: Disability from employer

I just received my first check after being off since April. It's not much, but it's better than nothing. Can I qualify for anything else to help pay the bills and put food on the table?

Posted: Sat Sep 04, 2010 06:55 pm Post Subject:

I just received my first check after being off since April.

Well, it's too soon to start receiving Social Security Disability. What kind of "check" did you get?

Posted: Sun Sep 26, 2010 10:06 pm Post Subject: Went out on one disability and chronic health problems compl

I received disability from my former employer when I sustained a neurological incident (i.e. stroke from migraine). I haven't been able to work since. However, I had already been on an intermittent FMLA for various other health issues and was about to go out on disability for those issues. Does it matter to the former employer which issue is now keeping me from working at my former job

Posted: Sun Sep 26, 2010 10:06 pm Post Subject: Went out on one disability and chronic health problems compl

I received disability from my former employer when I sustained a neurological incident (i.e. stroke from migraine). I haven't been able to work since. However, I had already been on an intermittent FMLA for various other health issues and was about to go out on disability for those issues. Does it matter to the former employer which issue is now keeping me from working at my former job

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