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What To Look For In A Disability Insurance Policy

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What You Need To Know About Disability Insurance

Own Occupation Long-Term Disability Insurance Policies Explained

By on May 17, 2019

If you had a life-changing accident or were diagnosed with a critical illness tomorrow, would you and your family be able to cope?

Ten years ago, Janet Freedman was rushing out the door of her home for work. Her arms loaded with tax returns, she missed a step on the stairs on her front porch and fell, hitting her head on the concrete. When her neighbours found her, she was barely conscious, with her head trapped between her own front steps and those of the house next door.

Paralyzed, with a partially severed spinal cord, it took more than six months of hospitalization and two years of intensive physiotherapy for Freedman to resume her life. She was unable to work and had no one to support her. Thank goodness I had a good private disability insurance plan, says Freedman, a certified financial planner and author of Hit by an Iceberg: Coping with Disability in Mid-Career. Those payments allowed me to concentrate on my rehabilitation and to live my life without worrying about where the money was coming from for daily living expenses. That made a big difference to me and my recovery.

Regular pay if you cant work

When calculating your coverage, keep in mind that payments from private disability insurance are tax-free, while the payout from most corporate plans is taxable.

A single payout if you get sick

Which type should you get?

What does the * mean?

Disability Insurance: What It Is And Why You Need It

One of the most important assets you have is the ability to work and earn an income. But what happens if you lose your ability to work even temporarily? The possibility is by no means remote. In fact, the Social Security Administration estimates one in four 20-year-olds will experience a disability for 90 days or more before they reach 67.1

Disability insurance also known as disability income insurance can give you income to live on if you become temporarily or permanently disabled.

Important Information About Disability Benefits

  • You must be under a doctors continuous care.
  • You must meet the applicable definition of disability for Basic, Voluntary Short-Term or Voluntary Long-Term benefits.
  • Theres a 14-day waiting period before you can begin receiving benefits through Basic or Voluntary Short-Term Disability. However, youll need to use up to 22 sick days, if you have them, before benefits begin.
  • Mental illness and substance abuse-related benefits are usually limited to a 24-month lifetime maximum through Voluntary Long-Term Disability Insurance.
  • If your disability is related to a condition you were diagnosed with, or had treatment for, in the 90 days prior to your initial enrollment in Voluntary Disability Insurance and your disability leave begins within one year after your enrollment, you will not be eligible for Voluntary Long-Term Disability benefits for that condition. You will, however, be eligible for Voluntary Short-Term or Basic Disability benefits, and for Voluntary Long-Term Disability benefits for conditions that were not pre-existing.
  • If you are receiving disability benefits through workers compensation, California SDI, Social Security, UCRP, or other sources, they will be coordinated with your Basic and/or Voluntary Disability benefits. In most cases, disability coverage from all sources combined can provide you with a maximum of 60 percent of your eligible earnings.

The Council for Disability Awareness, Disability Statistics, 2012

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Information You Need To Apply

Before applying, be ready to provide information about yourself, your medical condition, and your work. We recommend you print and review the . It will help you gather the information you need to complete the application.

Information About You

  • Your date and place of birth and Social Security number.
  • The name, Social Security number, and date of birth or age of your current spouse and any former spouse. You should also know the dates and places of marriage and dates of divorce or death .
  • Names and dates of birth of children not yet 18 years of age.
  • Your bank or other and the account number.

Information About Your Medical Condition

  • Name, address, and phone number of someone we can contact who knows about your medical conditions and can help with your application.
  • Detailed information about your medical illnesses, injuries, or conditions:
  • Names, addresses, phone numbers, patient ID numbers, and dates of treatment for all doctors, hospitals, and clinics.
  • Names of medicines you are taking and who prescribed them.
  • Names and dates of medical tests you have had and who ordered them.

Information About Your Work:

  • Award letters, pay stubs, settlement agreements, or other .

We accept photocopies of W-2 forms, self-employment tax returns, or medical documents, but we must see the original of most other documents, such as your birth certificate.

Do not delay applying for benefits because you do not have all the documents. We will help you get them.

Other Ways You Can Apply

Disability Insurance Infographic

Apply With Your Local Office

You can do most of your business with Social Security online. If you cannot use these online services, your local Social Security office can help you apply. Although our offices are closed to the public, employees from those offices are assisting people by telephone. You can find the phone number for your local office by using our Office Locator and looking under Social Security Office Information. The toll-free Office number is your local office.

Apply By Phone

If You Do Not Live in the U.S. Or One of Its Territories

Contact the if you live outside the U.S. or a U.S. territory and wish to apply for retirement benefits.

Mailing Your Documents

If you mail any documents to us, you must include the Social Security number so that we can match them with the correct application. Do not write anything on the original documents. Please write the Social Security number on a separate sheet of paper and include it in the mailing envelope along with the documents.

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What Is The Best Type Of Disability Insurance

The best type of disability insurance is the one that best meets your personal needs. Policies are offered to individuals or as group plans through an employer. Coverage options are either short- or long-term, and both are valuable depending on whether your illness or injury is temporary or not.

If you already have a group, long-term policy through your workplace, it might be wise to add supplemental or individual short-term coverage on your own. This will help bridge the gap between when your disability occurs and when your existing coverage kicks in, and may also offer other benefits such as student loan repayment protection.

Understanding Disability Insurance For Physicians

Physicians often pay attention to life insurance needs but fail to consider the possibility of a debilitating incident. A professional has a greater statistical probability of suffering a severe disability that impedes their ability to work, rather than to die prematurely. While some people have the financial resources to fund a disability on their own, most need disability income insurance to cover the risk.

Disability insurance planning has changed dramatically over the past decade. The insurance industry is offering many options to help professionals protect their most valuable assetthe ability to earn an income.

Purchasing high-quality disability insurance has never been easy. Although additional options available today create more flexibility, they also mean that the individual disability insurance marketplace has become even more complicated for professionals.

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What Are The Types Of Disability Insurance

Now, there are two types of disability insurance youll see a lot of: short term and long term. They basically do the same thing in how they replace part of your monthly salary. But well get more into that later.

Even though they do the same thing, short-term and long-term disability insurance have some differences you need to know about. Heres how they stack up:

Why would you get it?

Only if your employer offers it at no cost to you

If you rely on your income and you dont have savings to replace it long term

Decide Which Type Of Policy To Buy

How much disability insurance coverage do I need?

There are two main types of private disability insurance:

Long-term disability insurance is best for most people. Both types of coverage typically replace up to 60% of your income and cost approximately 1-3% of your pre-tax salary.

But, short-term coverage only lasts up to one year, whereas long-term coverage can last up to retirement age. Because short-term policies can begin paying benefits sooner , some people buy both types for more comprehensive coverage.

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What Is Disability Insurance And Do You Need It

7 Minute Read | August 26, 2021

Have you ever had friends or colleagues get hit with health issues that left them unable to work for months at a time? Its hard watching others struggle to make ends meet when life throws a curveball. And its even harder to imagine if it were you and your family.

What would an income loss mean for you? It would probably be stressful, frustrating, and even a little scary. The good news is, you can patch up this hole in your financial safety net with long-term disability insurance.

Things To Consider Before Buying Disability Insurance


Business owners buy insurance to protect many things: health, life, liability, vehicle, and inventory are just a few. But what happens if you become sick or are unable to work for a long period of time?

Disability insurance replaces income lost due to injury from a catastrophic accident or illness beyond 90 days. It generally replaces 60 percent of the policyholder’s income from the previous year, up until retirement age . Chris Peck, CEO of Stamford, Conn.-based CBP, an insurance brokerage firm that works with small and medium- sized businesses, says that disability insurance is usually not on a business owner’s radar, but it should be. “A business owner’s greatest asset is their earning potential,” Peck says.

When considering disability insurance, consider these factors.

1. Assess your risk. Peck suggests speaking with several insurance agents to discuss your specific needs. “You want to make sure you’re not spending unnecessary premiums for risks you may not have,” he says. Insurance companies consider a number of factors to quantify risk, says Katherine Woodfield, a New Jersey-based consumer advocate and author of Dont Buy That Health Insurance . For example, insurers have a Standard Industry Code for every occupation, which is used to consider characteristics of which industries are consider high-risk.

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What Isnt Covered By Disability Insurance

Disability insurance is only designed to replace a portion of your income — it doesnt cover extra expenses like your medical bills and long-term care costs.

While pregnancy isnt usually covered by long-term policies, complications that extend beyond pregnancy might qualify you for benefitsbut only if you had a long-term policy in place before you got pregnant.

Short-term policies do cover birth as a disability, but you might be waiting a long six-to-eight weeks for each check.

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What to Look for in a Disability Insurance Policy

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What To Consider When Buying Disability Insurance

If you’re considering disability insurance, make sure you:

  • check with your employer to see if you already have group disability coverage with your employer’s plan
  • shop around, especially if you’re considering private disability insurance

Consider group insurance offered through a union, guild, or professional or alumni association. Premiums for this type of coverage usually increase as you get older. You’ll need to renew your insurance every few years.

Consider Optional Policy Add

Your insurance company may offer optional policy features, called riders, that allow you to customize your coverage. Some riders come standard at no additional cost, while others will increase your monthly premiums.

Common standard riders include:

  • Automatic increase benefit: Allows you to increase your monthly benefit annually for a limited period, to mimic pay increases.

  • Guaranteed renewable: Means that your insurer canât cancel your policy as long as you keep up with premium payments.

  • Waiver of premium: Waives your premiums if you become disabled and canât work.

Popular riders include:

  • Future purchase option: Allows you to increase your coverage at any point in the future, regardless of any changes in your health.

  • Non-cancelable: Means that your insurer canât cancel your policy, increase your premiums, or change your benefits as long as you keep paying your premiums.

  • Own-occupation: Makes it easier to qualify for benefitsâyouâll qualify if you canât perform the duties of your occupation, as opposed to the duties of any occupation.

  • Residual or partial disability benefit: Pays a benefit if youâre still able to work in your own occupation while disabled, but are losing some income due to reduced hours or productivity.

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Watch Out For The Definition Of Disability

The definition of disability in a policy is extremely important. It tells you under what circumstances you will qualify to receive benefits.

Own-occupation coverage pays benefits if you cant work at your chosen fielde.g., attorney or teacher. Own-occupation policies are the most expensive type of disability coverage because they provide the broadest coverage.

Any-occupation coverage pays benefits if you cant work at any occupation for which your education level and training has prepared you. Thus, if you can no longer perform the duties of a nuclear physicist, but you can teach physics at college level, you will not receive benefits.

Income-replacement policies, which are less expensive than own-occupation or any-occupation, replace whatever portion of your income you are no longer able to earn.

Is Disability Insurance Worth It

How Do I Qualify for Disability Insurance Benefits?

Do you need disability insurance? If you depend on a paycheck to cover for your living expenses, the simple answer is yes. This article will provide answers to three other questions people commonly have about disability insurance:

  • What are the different kinds of disability insurance?
  • How do disability insurance policies work and what should I look for?
  • How do I get the disability insurance I need?

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How We Chose The Best Disability Insurance

We compared more than 15 disability insurers before picking the best for each category. In doing so, we compared not only the products offered but also pricing, the ease of getting a quote and then buying coverage, options for benefits, and how quickly coverage would kick in .

Of course, it was also important to choose insurers with a strong history of claims satisfaction, trusted coverage, and financial stability. We looked at data from the NAIC, BBB, and AM Best in that analysis.

What You Should Look For In A Disability Insurance Policy

One very key thing to note is that there are a variety of policies with policy provisions known as riders which can be amended and factored in the disability insurance. They have two distinct protection features that you can pick depending on your preference Non-Cancelable and Guaranteed Renewable.

The policy benefits vary significantly offering the client an array of options to pick from

  • Partial or Residual disability rider- Youll be able to exercise the opportunity to get back to work and receive partial disability payments.

  • Benefits Coordination – This option offers you the chance to specify the target amount youll receive from all your policies combined.

  • Premium Refunds – If there are no claims made after a specific time youll be able to get a refund of your premiums.

  • Adjusted to cost of living – Though it may cost a bit higher– just as the policy suggests youll receive increased benefits proportional to the cost of living.

  • Premium Waivers – This allows you to forfeit insurance payments in case of a 90 day disability period.

  • Additional purchases – For this option, you have the leeway to buy additional insurance later on.

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How Much To Purchase

In general, insurance companies limit the amount of coverage to replace income. Policies typically provide about 66 percent of gross wages. According to Katz, the right benefit amount to purchase is straightforward. It would be any portion of your current paycheck, including commissions and bonus, not covered by your employers benefit plan, he says.

If you have an employer-sponsored plan, learn what it covers as well as the definition of what “covered earnings” is, says Katz. Determine, too, what percentage of your earnings is covered as well as the monthly cap. Check whether income you receive from your disability income insurance policy is taxable or not. Once you do all that, you should be able to design a plan to “fill the income gap” of your current earnings not covered by your employer plan, says Katz.

If your employer doesnt offer a disability income insurance plan, your personal policy should seek to cover as much of your income as possible, says Katz.

Other Sources Of Disability Benefits

What to Look for in a Disability Insurance Policy

You may also be eligible for benefits from the Canada Pension Plan and the Quebec Pension Plan to add to your income when you’re unable to work.

The CPP disability benefit and QPP disability benefit are available to people who have contributed to those plans and aren’t able to work regularly at any job because of a disability.

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