Disability Insurance

What is disability insurance?

Disability insurance pays a monthly income to the policyholder who cannot work because of an illness or accident. The most important aspect of disability insurance is the definition of disability. Make sure you thoroughly understand what circumstances need to be met before you can collect on a disability insurance policy. Most companies allow disability insurance benefits up to a percentage of your income. The target is usually 60%.

Am I covered by Social Security?

Probably not. The definition of social security is very strict. Take a look at how the Social Security Administration defines a qualifying disability.
http://www.ssa.gov/dibplan/dqualify4.htm

How do I purchase disability insurance?

Most life and health insurance agents also sell disability insurance. As always, make sure you understand what you are buying and read the contract thoroughly. Your employer may also offer disability insurance. Finally, don't confuse Short-Term benefits with Long-Term benefits.

What types of disability insurance are there?

There are two types of disability insurance: Short-Term disability and Long Term Disability. Short-Term disability has a maximum benefit of 2 years and Long-Term disability has a benefit period that ranges from several years to a lifetime benefit.

What do I need to look for in a disability policy?

Disability insurance policies have many provisions. Here are some of the important features available:

Definition of Disability - This provision defines under what conditions you will receive benefits. Make sure your policy covers you for what you do.

Non-cancelable - The contract cannot be cancelled except for nonpayment of premiums. This provision also gives you the right to renew your policy every year without a premium increase or reduction of benefits.

Guaranteed Renewable - The contract cannot be cancelled except for nonpayment of premiums. Under this provision, the insurance company does have the right to increase your premiums.

Waiver of Premium - Under this provision, you are not required to pay premiums once you have been disabled for 90 days.

Cost of Living Adjustment - Under this provision, your disability insurance benefit will increase with inflation. The increase in benefit is calculated using the Consumer Price Index (CPI). Any increases in benefit amount will also increase your premium.

Partial Disability Rider - This provision may also be called a Residual Disability Rider. Under this provision, you may be able to return to work and collect partial monthly benefits.

Return of Premium - Under this provision, the insurance company is required to refund a portion of the premium if no claims are made.

Coordination of benefits - Under this provision, the insurance company can adjust the monthly benefit amount based on other benefits received.

Additional Purchase Option - Under this option, the insurance company offers you the guaranteed right to purchase additional disability insurance benefits.

Where can I buy Disability insurance?

Most employers offer some form of disability insurance. You can also buy disability insurance from insurance companies nationwide. Individual, group, and company disability policies are all different. Understand the differences before you decide if you are adequately covered. Many people choose to supplement a group policy with an individual policy.