Disability Insurance Policy Features.
There are many features of a disability insurance policy and they are all important. Not every disability policy is the same and not every policy has the same features. Depending on your specific occupation, age, state of residence, etc., not all of the features listed below may be included on your disability income insurance policy. Be sure to check with us regarding your specific situation.
Below are some of the most common features of a disability insurance policy and some questions to ask when you are shopping for coverage.
**Disability Insurance Shopping Tip** - Work with an independent insurance broker!!!!
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Is the insurance company financially stable?
Check the financial ratings of an insurer. We can provide this information or you can obtain it from independent rating agencies such as A.M. Best Company, Standard and Poor's, Fitch Ratings, Weiss Research and Moody's Investors Service. After all, if you do need to make a disability claim, you want to make sure the insurance company will be able to keep their end of the bargain.
When are you considered disabled? Definition of Disability...One of the most important, if not, the most important feature of a disability insurance policy.
When you buy disability income insurance coverage, you are essentially buying the insurance company's definition of disability. There are three basic definitions that typically include "own-occupation" and "any occupation," as well as "partial" or "residual" disability.
Own Occupation. This refers to the occupation you were working in just prior to your disability. If your "own occupation" is protected, the policy will not require you to work in another occupation. This is also sometimes referred to as "regular occupation" or "your occupation".
Any Occupation. Some policies will not pay benefits if you can perform "any" occupation you are suited to, based on your education, training and experience.
Look for a disability income insurance policy that considers you disabled if you cannot perform the substantial and material duties of your own regular occupation. This option is not always available. Based on your occupation you may be eligible for a less comprehensive definition of disability, which is o.k. Remember that having some sort of coverage is often better than having nothing at all. You can further enhance your policy with coverage that provides benefits in the event of a partial disability.
How long is the waiting period?
The waiting period (also known as the elimination period) is the length of time you must wait before disability income benefits begin to be paid if you are too sick or too hurt to work. It can be as short as 14 days (short-term disability policy only) or as long as a year. As a rule, the shorter the waiting period, the more expensive a policy will be. It's important to know that benefits are typically not paid until the end of the month following the waiting period. (So if you have a 180-day waiting period, you'd receive your first benefit check after 210 days - or more.) Most people choose either a 90-day or 180-day waiting period. Consider your available savings and assets when making this choice.
How long will benefits last (Benefit Period)?
The benefit period is the length of time benefits are paid. The shortest benefit period is usually two years. A five-year benefit period is fairly common feature of a disability insurance policy. Most people purchase coverage that lasts until age 65, or longer if available. You should buy the longest benefit period you can afford. If you remain in good health, most companies will allow you to upgrade your coverage at a later time.
Is the policy non-cancelable and guaranteed renewable?
A non-cancelable and guaranteed renewable disability insurance policy provides considerable security and is an important feature of a disability insurance policy, since the insurance company can't raise your premiums or cancel the policy for as long as you pay the premiums. A policy that is only "guaranteed renewable" can increase premiums under certain circumstances.
What about Partial, Residual and Loss of Income Disability?
Some policies will pay a proportional benefit if you become partially/residually disabled and experience a loss of earnings. Most companies use a "percent of income" formula to determine benefits for a residual disability. Some policies will cover you if you can work part-time due to your disability and still do all of your regular duties - or if you can work full-time but do only part of your regular duties due to your disability. Benefits usually begin where there has been a 20 percent loss of income due to disability. In most cases, if you lose 75 percent or more of your income, you are considered totally disabled.
What about guaranteed future insurability?
This means that while you are working, you can increase your policy's monthly disability income benefit as your salary grows - without providing evidence of medical insurability. This feature can usually be added to the policy by rider.
Is there inflation protection?
Most disability insurance companies offer "cost of living" riders that help benefits keep pace with inflation, while an insured is disabled and collecting benefits.
Are premiums waived during disability?
Many policies will automatically waive your premiums during a qualified disability. They are typically waived after the lesser of 90 days or the elimination period.
Is there a rehabilitation clause?
Since most insurance companies want to help you resume an active lifestyle and get back to work as soon as possible, they will often offer assistance in your rehabilitation. Some policies are based on a mutual agreement between the policy owner and the company. Other policies limit the amount paid for rehabilitation. Make sure to review the policy, so you have a clear understanding of the insurance company's responsibilities - and yours.