Tag Archives: disability

Insurance Riders

Insurance Riders

You’ve worked out how much life insurance you need.   A collection of life insurance policy add-ons, called Insurance riders, must be considered. Insurance Riders can give policyholders additional benefits.

They increase peace of mind, that if something goes wrong, there is a Plan B.  When you buy life insurance, available Insurance riders vary by insurance company.   Costs also vary and depend on many factors, including your age, health and type of policy.

1.  Waiver of Premium Insurance Rider:

A waiver of premium rider usually associated with life assurance may be inserted into a policy at an extra cost.  The policyholder must have been disabled for a specific period, for example, six months.  Other requirements may be necessary such as the state of health of the policyholder and must be below a certain age.

2.  Disability Income Insurance Rider:

This is one of the most common riders and one that may be particularly important to younger policyholders (typically, those under 40).

This rider generally cannot be added after you reach age 45, although some insurers make it available through age 50. (https://us.axa.com/insurance/disability-income/insurance-riders.html) You collect a regular income from the insurance company if you become totally disabled and can’t work.  The policy specifies the amount of the income and whether it’s paid for a certain amount of time or for the length of the disability.  Some disability income riders pay out only if you become disabled from an accident while others pay on accident and sickness.

3.  Guaranteed Insurability Insurance Rider:

This rider provides specific dates on which additional life insurance policies can be bought.  Usually, the older the insured gets, the fewer dates the policy owner has to purchase more life insurance. (http://www.lifeinsurancewiz.com/LifeInsurance/LearningCenter/guaranteed.htm) This rider lets you purchase additional life insurance at a later date without undergoing a medical exam or providing any evidence

This rider lets you purchase additional life insurance at a later date without undergoing a medical exam or providing any evidence of your insurability.  Because you never know how your health could change, it makes sense to consider this rider.

4.  Term Conversion Insurance Rider:

Provides coverage for a certain period of time, such as 10, 15 or 20 years.  Permanent life insurance, such as whole life or universal life, provides coverage for your entire life, so your beneficiary receives a benefit no matter when you die.

This insurance rider lets you convert term life insurance into permanent life insurance without undergoing a medical exam.  It is especially attractive to young people starting careers and families who need life insurance but don’t have enough money yet to secure all the coverage with permanent life insurance, which has higher premiums than term life. There will be a deadline for when you must

There will be a deadline for when you must convert if you want to change the term policy to permanent life insurance without providing health information.  Understand the convertibility features before you buy.

5.  Accelerated Death Benefit Insurance Rider:

Accelerated Death Benefit Rider has become standard in the insurance industry and is usually included automatically for free or offered at nominal cost.  The rider lets you collect a portion of the policy’s death benefit if you become terminally ill with a short life expectancy, such as one year.  The policy spells out how much of the death benefit is available before death.  Usually its capped at $250 000 to $500 000.  You can use the proceeds for anything, such as paying medical bills or living expenses.  Even though the insurer offers the rider free, the company may charge a fee if it is exercised.

6.  Critical Illness Insurance Rider:

A rider added to a life insurance policy to protect the insured against financial loss in the event of a terminal illness.

The insurer pays a lump sum if you’re diagnosed with any of the critical illnesses specified in the insurance policy, such as cancer, heart attack, coronary artery bypass, major organ transplant, stroke, kidney failure. (http://www.moneycontrol.com/glossary/insurance/critical-illness-rider_333.html).   Instead of reimbursing you for medical expenses, the way health insurance does, the rider provides money to use for any purpose during the course of the treatment.

Instead of reimbursing you for medical expenses, the way health insurance does, the rider provides money to use for any purpose during the course of the treatment.

7.  Child Protection Insurance Rider:

No one wants to consider the possibility of losing a child, so all emotion must be set aside when considering a child protection rider.  Although the death of a child typically would not result in income loss, as would the death of a spouse, the tragedy still would have financial consequences which could be an additional hardship for a bereaved family.  This term life insurance rider provides coverage for final expenses in case the unthinkable happens.  The coverage generally can be purchased in units –  for example $1000.  Basic information about the child’s health is required for underwriting.

 This term life insurance rider provides coverage for final expenses in case the unthinkable happens.  The coverage generally can be purchased in units –  for example $1000.  Basic information about the child’s health is required for underwriting.

8.  Accidental Death Benefit Insurance Rider:

If you die from an accident, this rider provides an additional benefit on top of the policy’s regular death benefit. The option is often referred to as double indemnity when the additional payout equals the original death benefit.  Sometimes the rider also includes additional payment for dismemberment.  You would collect money if you lost a limb or your sight.  Life insurers will consider your occupation and hobbies when determining premiums.

9.  Return of Premium Insurance Rider:

If you live to the end of the term, in exchange for paying the premium, in most circumstances you get all your money back. Some companies use a separate rider where others, like ING, write the return of premiums benefit into a basic policy.  You pay a higher premium for the opportunity to get your money back.  The big question to consider.  How does paying the extra cost for the return of premium rider compare to investing that money and buying a basic term policy instead? To find the answer, subtract the annual premium for a basic term policy from the annual cost of a return of premium policy.  The difference is how much you would have to invest each year during the insurance term.  Then calculate what annual rate of return you’d need on that money to beat the amount you’d get back from a return-of-premium policy.

Conclusion:

There is no one-size- fits- all answer to whether any of these Insurance riders are right for you.  You’ll need to weigh policy options to find the best package for your needs. (http://www.foxbusiness.com/personal-finance/2011/05/25/useful-life-insurance-riders/)

Remember – money from the return of premiums is tax-free, but your own investment returns are taxed.  In some cases (depending on age, sex, tax bracket and other factors), you’d need to get more than a 7% rate of return on your investment to beat the return of premium policy

Physicians’ and Surgeons’ Disability Insurance Plans

Preparation is extremely important in the life of a medical professional. Many physicians and surgeons do not enter their respective fields until their early to mid thirties. College years are spent preparing for examinations and the years in residency qualifying to learn how to manage patients. Many young medical professionals experience financial turmoil, accumulating loans and bills as they proceed through years of study. When they begin earning good incomes, most of the time any planning or preparing for disability, loss of income and/or retirement is least likely to be taken into consideration at that stage.

Physicians and Surgeons’ Disability Insurance Plans are designed to ensure that professionals working in the medical field will be able to maintain their standards of living in the event of an injury or illness which results in their inability to work. It is of primary importance that a physician or surgeon’s occupation or medical speciality is properly classified as this classification determines the premium rate. Premiums can vary greatly from one company to another, as different insurance companies may assign a different occupational class to the same occupation.

Some companies feel that if the above-mentioned medical specialists cannot practice their speciality, but decide to work in another capacity earning a similar income, he or she should not be entitled to receive disability benefits. It is wise to purchase a policy which is both Non-Cancellable and Guaranteed Renewable (i. e. contract that cannot be changed and premiums that cannot be raised). (Source: whitecoatinvestor.com)

“Own Occupation” coverage means that you continue to receive monthly income benefits until you are able to perform the specified duties of your speciality. It is not always available to Neurosurgeons, Orthopedic Surgeons, Anesthesiologists, Emergency Medicine Physicians and Thoracic Surgeons. Some companies feel that if the above-mentioned medical specialists cannot practice the specialty for which they were trained, but decide to work in another capacity earning a similar income, he or she should not be entitled to receive disability benefits.

“Loss of earnings” policy has become more common place in the industry today. It typically pays benefits if you are “unable to perform the substantial and material duties of your occupation and you are not working”. Unless your policy contains a residual disability rider, no benefits would be paid if you choose to work in another occupation or medical speciality.

Residual disability means that you are at work and not totally disabled under the terms of your policy, but due to sickness or injury, your loss of income is at least 20 percent of your prior income. This rider also states that if your loss of income were more than 75 percent of your prior earnings, the insurance company would regard your loss to be 100 percent and future benefits would be paid.

Residual disability:  Examples of information that may be required to obtain Residual disability could be tax returns for the past 5 years, monthly profit and loss statements for the past 3 years and perhaps even bank account statements. Basically, aside from all the details asked, if you were working 50 percent of the time that you used to work and you are making 50 percent of your pre-disability earnings, then you would receive 50 percent of your benefit because you had a 50 percent loss of income. In simple terms, Residual Disability Benefits typically begin when the insured is able to return to their regular occupation in a limited capacity but have incurred a loss of earnings of at least 20 percent.

Partial Disability benefits are paid to the insured person who experienced a loss of time or duties due to a partial disability. The person will be eligible for a flat percentage of their monthly benefit which typically works out to a maximum of 50 percent.  What if he/she no longer performs surgery? What if he/she had eyesight that started to fade or was confined to a wheelchair?

A disability is simply defined as an illness or injury that interferes with your ability to work. You want to have a contract that can never be changed or premiums that can never be increased. The definition of a good contract will read: if you cannot perform the material duties of your speciality, benefits will be paid.

With good disability insurance contracts if you could not perform your speciality because of an injury or illness and you engaged in any other occupation you would still receive your monthly benefit. Even if you were making a higher income in your new occupation, you would still receive your monthly disability benefit. Most good disability contracts will have extra policy riders you can purchase. Riders that would allow you to increase your coverage later in life regardless of your health. A residual rider that would pay benefits in the most realistic claim scenario of being partially disabled but still working in your own occupation. A cost of living rider ensures that if you were to go on to claim, your benefit would increase every year to keep pace with inflation. Insurance companies know from claims statistics that most claims involve partial disability where individuals are still working in their own occupation or in another occupation.

Insuring body parts

As long as a person is willing to pay the required premium, anyone can insure a body part of their choice. The 40 members of the Derbyshire Whiskers Club insured their beards against fire and theft for $32 each. This is called speciality insurance and before an entertainment company or athletic club pays any high premium for mega income-producing stars or athletes, they would have obtained the maximum possible insurance via standard life and disability cover. Your finger that moves the trackpad on your laptop could be insured by you, however, buying disability in this instance would be more economical.

It is the norm for entertainment companies and athletic clubs to obtain speciality insurance for huge cash-earning celebrities, as well as high-income athletes. Real Madrid renewed the insurance policy for Cristiano Ronaldo, valuing his legs at a whopping 103 million Euros against serious injury. Goalkeeper and Real Madrid captain Iker Casillas has his hands insured for 7 million Euros. Certain speciality insurance companies will insure the insured’s whole body but exclude the part that is most at risk. Factors which are taken into account are yearly income, type of sport, age and injury history.

Ahead of the 2014 Soccer World Cup Germany’s squad was valued at an insurable amount of 795 million Euros. This research was produced by the Centre for Economic and Business Research for Lloyds. The amount is calculated as the discounted sum of players’ future earnings, both from endorsements, salaries and bonuses.

One of the earliest body part policies was taken out by Ben Turpin. He worked in vaudeville, burlesque and circuses in the 1920s. Turpin had a distinctive appearance, with a small wiry frame, a brush mustache and crossed eyes. He insured his eyes and would have collected $20, 000 if his eyes had gone straight. A man most remembered for his legendary drinking talents, Aussie cricketer Merv Hughes insured his handle-bar mustache for $370, 000 during his cricketing days as a member of the Australian national team. The Welsh baritone Tom Jones was rumoured to have insured his chest hair for $7 million. The geriatric crooner still has the power to make the ladies swoon and he apparently considers his luxurious pelt an essential aspect of his sex appeal.

Keith Richards is an English musician, singer and songwriter and one of the original members of the English rock band, the Rolling Stones. Rolling Stone magazine credited Richards for “rock’s greatest single body of riffs” on guitar and ranked him 4th on its list of 100 best guitarists. His hands are insured for $1.6 million.

Egon Ronay was a Hungarian-born food critic who wrote and published a famous series of guides to British and Irish restaurants and hotels in the 1950s and 1960s. These guidebooks are credited with raising the quality of British cuisine offered in public eating places. Ronay also championed foreign cuisine for British diners. He insured his influential taste buds for £250,000. (http://en.wikipedia.org/wiki/Egon_Ronay)

Sir Thomas Jones Woodward known by his stage name Tom Jones is a Welsh singer. He became one of the most popular vocalists to emerge from the mid-1960s. Tom Jones had his chest hair insured for £3.5 million in 2008. The geriatric crooner still has the power to make the ladies swoon and apparently considers his luxurious pelt an essential aspect of his sex appeal.

Ornella Muti was born in Rome. She is mostly known to the French for appearing in a television commercial of Giovanni Panzani Pasta. She was voted “The Most Beautiful Woman in the World” in 1994 by a worldwide poll of the magazine “Class”. She regards her breasts as her best asset and has insured them for $350,000.

James Francis “Jimmy” Durante was an American singer pianist, comedian and actor. His distinctive clipped gravelly speech, Comic language butchery, jazz-influenced songs and large nose helped make him one of America’s most familiar and popular personalities of the 1920s through the 1970s. His jokes about his nose included referring to it as a Schnozzola and this word became his nickname. His Schnozzola as he referred to it was insured for $442,000.

Angela Mount has unparalleled experience in the wine retail business. She is widely credited with revolutionising wine on the high street. She has been named as one of the top most influential people in the Wine Industry by The Drinks Business. Angela’s taste buds were famously insured for £10 million by former Somerfield bosses. Somerfield (originally Gateway) was a chain of small to medium-sized supermarkets operating in the United Kingdom.

Kenneth Arthur “Ken” Dodd, OBE, is an English comedian, singer, song-writer and actor. His trademark is his frizzy hair and protruding teeth. At the age of seven, he was dared by his school friends to ride his bike with his eyes shut. He accepted the dare, crashed, and received facial injuries which resulted in his distinctive buck teeth. He insured his trademark buck teeth for £10.6 million. (http://en.wikipedia.org/wiki/Ken_Dodd).

Robyn Rihanna Fenty – a Barbadian recording artist has an estimated net worth of $90 million. She has insured her legs for $1 million. Michael Ryan Flatley is an Irish-American dancer and became internationally known for Irish dance shows Riverdance and Lord of the Dance. In May 1989 Flatley set a Guinness Book world record for tapping speed at 28 taps per second. In 1998 Flatley broke his own record for tapping speed by achieving 35 taps per second, as well as a Guiness Book recognition in both 1999 and 2000 being the highest paid dancer earning $1.6 million per week and having the highest insurance policy on a dancer’s legs of $40 million. (http://en.wikipedia.org/wiki/Michael_Flatley)

How to Buy Disability Insurance

Without disability insurance, disability can be a financial disaster for you and your family. If you become disabled during your working life, you lose your earning power, but you can continue to have the same living expenses along with mounting medical costs. If you decide to purchase disability insurance, ask the following questions to make sure you get the coverage you need. If you ever become disabled, the right disability insurance policy can help you avoid financial ruin while you recover your health.

How does the disability insurance plan define disability?

Some disability insurance policies consider you disabled only if you are unable to perform the duties of any job, which means you may not be eligible for disability benefits if you can still manage a low-skill, low-wage job. Better disability insurance plans pay benefits if you are unable to perform the duties and fulfill the responsibilities of your usual occupation.

When do disability insurance benefits begin?

Most plans have a waiting period after an illness and before payments begin. Your waiting period will depend on your policy. Your first disability payment can range from 60 days to a year depending on your policy’s particular waiting period. If you are able to choose your waiting period and would like a lower disability insurance premium, you will want to choose a longer waiting period.

Disability Coverage Options:

  • Any Occupation: This definition is more restrictive as benefits are only paid if the insured is unable to perform the duties of any gainful occupation for which he is suited by education, training or experience. Several sites have more information on disability insurance decision points.
  • Partial Disability: Under this policy benefit, the insurer pays a benefit when the insured is only able to return to work (as authorized by his doctor) in a partial capacity. The concept is that an insured who is able to perform some, but not all of the duties of his occupation, is entitled to some benefits.
  • Residual Disability This benefit encourages employees to return to work, at least part-time, following an injury or illness. A residual disability is one that results in the inability for an insured to perform some of the duties of her own occupation full-time, leading to a loss of income and therefore a benefit is paid. Be aware, however, that even long-term disability may not last as long as the client might expect. The typical length of a disability claim is two and a half years. It is in the insurer’s best interests to do whatever they can in terms of rehabilitation and job training, to move beneficiaries back to work. And though Cadillac policies (Informally, a Cadillac plan is any unusually expensive health insurance plan, usually arising in discussions of medical – cost control measures in the United States) offers “own occupation” coverage meaning that the client will receive benefits unless they are able to go back to work in your chosen field – many employer – paid plans only cover “own occupation” benefits for the first two years.  After that you will be expected to try to find work in any field.

How big a benefit can you collect?

It is typical now for companies to pay for long term coverage that would pay workers 50 percent or 60 percent of their income, and to allow workers to pay for another 10 or 20 percent of their monthly benefit.  But be aware that many policies also limit total monthly coverage – the median weekly maximum is $1,154 according to Mercer. Clients may need more money than that, especially because Mercer reports that two in five employers will kick you out of their health insurance plan while you are out on disability. The disability income insurance should cover 60% of the individual’s salary.