Tag Archives: long term coverage

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.