Answers to Your Questions About Disability Insurance
If you were to become disabled and are unable to work, you and your family not only loses your income, but also any savings that would be invested for your retirement. The purpose of disability income insurance is to help you maintain your lifestyle and replace your lost income resulting from a disability that would prevent you from working.
Below are some of the most common disability insurance questions that get asked about disability insurance policies.
- What is the waiting period?
- Are my disability premium & rates guaranteed?
- Is my future income insurable?
- How long will disability income benefits last?
- Is there protection against inflation?
- What other optional riders are available to incorporate into a disability insurance policy?
1. What is the waiting period?
The waiting period is also know as the elimination period, in it's simplicity it really is just a deductible. This is the period of time between the onset of a disability, and the time you are eligible for benefits. The waiting period can be as short as 30 days or go as long as 360 days. The shorter the waiting period the more expensive your policy will be, the cost of havng a longer elimination period might not save you much money for the risk you take on.
Once the waiting period has been satisfied, you receive your actual benefit checks at the end of the month. Basically, if you have a 90 day waiting period this means that you are four months away from getting any payout on your disability insurance claim. |
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2. Are my disability premium & rates guaranteed?
This feature is added to the policy by a rider. This rider is called the Non-Cancellable and Guaranteed Renewable rider, having this is a must when considering disability. Having this rider guarantees that after your policy is active there will be no changes to your premium until the terminiation date as long as the premium is paid on time.
A policy that is 'Guaranteed Renewable' can increase your premium under certain circumstances. If the insurance company is having an increase in claims within a certain occupational class the insurance company can refile its rates with the state requesting an increase in the cost for coverage. This type of coverage is not as comprehensive as the Non-Cancellable & Guaranteed Renewable option. |
2. Is my future income insurable?
This feature is added to the policy by a rider. This rider is called the Future Increase Option or the Benefit Update Rider and will protect your future earnings. Having this will allow you to increase your coverage to the maximum amount you are eligible for assuming that you have an increase in your monthly income. Usually the only thing you need to provide when increasing your monthly benefit is a copy of the most recent tax return to prove your new income level. The most important aspect this rider protects is all the money you may make in the future, without having this rider there would be no way to protect your future earnings.
3. How long will disability income benefits last?
The length of time that you are eligible to collect disability benefits is called the benefits period. If sickness or injury occurs & it prevents you from performing the material and substantial duties of your occupation, the waiting period begins. Once the waiting period has been satisfied, your monthly benefit checks will arrive at the end of the month. The maximum amount of months that these checks can possibly come in is called your benefit period. Your benefits stop when you return to work in your occupation, or depending on the contract to another occupation making the same income.
The shortest benefit period is usually two years. A five-year period is an option although most people purchase disability coverage until age 65 or longer. You should consider purchasing the longest benefit period that you can afford. |
4. Is there protection against inflation?
This feature is added to the policy by a rider. This rider is called the Cost of Living Adjustment (COLA) & will provide additional benefits that will be adjusted to reflect changes in the cost-of-living index. The percentage applied will be based on the consumer price index since the time that the disability began.
5. Are premiums waived during disability?
Some policies will waive your premiums during a qualified disability. They are typically waived after the lessor of 90 days or the waiting period.
6. What other optional riders are available to incorporate into a disability insurance policy?
Below are additional rider options that you can purchase to enhance your disability policy:
- WAIVER OF PREMIUM: This rider provides that you need not pay the premium while totally and permanently disabled prior to an age specified in the policy.
- SOCIAL INSURANCE: This rider provides benefits when you are disabled and not receiving disability benefits from a social insurance program such as Social Security or Workers Compensation.
- GUARANTEED INSURABILITY RIDER: This rider allows the purchase of additional coverage without proof of insurability. It specifies when the insurance can be purchased and places a limit on the amount that may be purchased at one time.
- ACCIDENT MEDICAL EXPENSE: This rider provides benefits even if you are not totally or even partially disabled. This rider pays for a small percentage of the total disability benefit to cover medical expenses incurred when you must take time off from work for medical treatment.
- ACCIDENTAL DEATH & DISMEMBERMENT: This rider will treat accidental death or dismemberment as a presumptive total disability. It would pay a lump sum and/or disability income benefits in the event of death or dismemberment resulting from an accident.
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