Besides your health, what is your most valuable asset?
Your ability to work and earn a paycheck. Consider this: You suffer a significant injury or succumb to a serious illness and can’t work. How would you continue to pay your bills? Would you be able to maintain your current standard of living? Advancements in medical technology allow people to survive devastating injury/illness but also increase the likelihood of becoming disabled at some point in your adult working life. Owning a disability policy provides vital income replacement.
A disability policy can replace a portion of your income should you be unable to work due to illness or serious injury.
When it comes to disability coverage, there are two major types of disability insurance that individuals should be aware of:
Short-Term Disability (STD)
This type of disability insurance provides supplemental income during the early part of a period of disability. Having this sort of coverage may pay benefits for a timespan as short as two weeks or for as long as two years. Short term disability is often included as part of an employee benefits package.
Long-term Disability (LTD)
This type of disability coverage works as income for an extended period of time, this coverage usually ends after five years or in the event that the disabled individual turns 65 years old. Some individuals’ opt-in for long-term disability insurance as it is provided as a voluntary benefit from their employer; still, many purchase this type of disability benefit on an individual basis.</p> <p>Long-term disability benefits can be categorized into two sub-groups: those which are a) non-cancelable and those which are b) guaranteed renewable. (On occasion carriers offer other less expensive policy options including no option for or much more limited premium amounts or options providing eligibility for renewal guarantees.) On the behalf of LTD policies of the guaranteed renewable or non-cancelable variety, the insurer cannot refuse to renew the policy nor can the policy be cancelled given that the required premiums are paid on time. The key differences between the two major LTD policy types are that:
When are you considered to be disabled?
Depending on the policy, the definition of a disability may vary slightly. Case in point: there are plans that pay when you are unable to engage in activities having to do with your occupational duties, while other plans pay when you lack the ability to engage in any occupation for which you are reasonably qualified for based on your level of experience or past training. Commonly, many plans use an own-occupation designation for two-or-so years (sometimes even longer), with an any occupation designation for any amount of time that is longer. Many disability plans make it a requisite that the individual not be employed while collecting paid benefits. Additionally, a number of policies pay the individual a portion of their monthly benefit in the event that part of their income was lost due to their disability (most-often-times this is referred to as a loss of earnings or a residual benefit). Other plans policies include something referred to as a ‘rehabilitation benefit’. Rehabilitation benefits pay for some or all of the costs associated with a course of occupational rehabilitation approved by the insurer. It is important to acknowledge that many policies will not under any circumstance cover disabilities caused by drug abuse, the attempt to commit a crime, war, suicide attempts. It is also in one’s best interest to keep in mind that pre-existing conditions are also frequently excluded in disability benefits.
When do disabled benefits begin to accumulate?
Waiting periods take place prior to benefits to begin accumulating with the majority of Long-term Disability plans on the market. Most commonly one can expect a waiting period of 90-days or so. However, in some cases individuals can get as low as a 60-day waiting period. Other LTD benefit accumulation waiting periods that we have seen include 180-day, 365-day, as well as 730-day waiting periods. When determining a plan with a waiting period that is the right match for yourself, you should consider how much of your savings are able to contribute to living expenses, and how long you can afford to live without your average paycheck. Why should this be a consideration? Because when it comes to plan designs: generally, the longer the waiting period, the lower the premium.
For what amount of time are disability benefits generally paid?
Policyholders can elect the maximum amount of time benefits will be paid in most disability income plans. Most frequently benefit periods are offered in: two years, five years, and up-to the age of 65 years old.
The reality of disability.
Your income serves as the source of funding for two jobs that are integral to your future livelihood. Your income is providing for both today’s basic necessities and everyday modern luxury, while at the same time serving as the cornerstone of your plans for the future. For the entirety of the time that you have the ability to earn an income, you are able to accumulate further assets.
What generally happens should a disability strike?
Pender & Associates work alongside a wealth of ancillary carriers to assist in providing disability coverage plans to both the individual market as well as a group policy employer benefit offerings solution. In our experience, no one carrier provides a perfect ‘one-size-fits-all’ solution for every individual. Comparing the available plans from top providers residing within the current marketplace ensures that we fit our clients with the coverages best suited to their individual needs at an affordable rate.
