Personal disability insurance is designed to replace 45 – 60% of your gross income if you become unable to work due to sickness or injury. The policy will pay you a monthly benefit. If you are paying the premium from your pocket, the dollars paid to you as a benefit will be received tax free.
When will the benefit begin and how long will it last?
Elimination Period
This is the time between when your sickness or injury begins and when the first monthly benefit is paid. Most policies have 60, 90, 180, or 365 day elimination periods.
Benefit Period
This is the length of time the benefit will continue after you have met the elimination period requirement. Most policies offer 2 year, 5 year, or to Age 65 benefit periods.
What makes one disability policy different from all the others?
When purchasing disability insurance, careful study and comparison needs to be made. Each policy can be very different from the other.
A disability policy is made up of the following:
Policy Provisions
Exclusions
Limitations
Supplemental Riders
Each of the above contains specific definitions of the benefits they provide. What distinguishes most policies apart is the definition of disability and renewability features.
Definition of Disability
Own Occupation Definition
A policy will pay a benefit if, after the elimination period, you are unable to perform the material and substantial duties of your own occupation.
Dual Definition
Own Occupation Definition for a certain number of years (2-5)
A policy will pay a benefit if, after the elimination period, you are unable to perform the material and substantial duties of your own occupation.
Any Occupation Definition thereafter.
A policy will continue to pay a benefit if, you are unable to perform the material and substantial duties of any occupation for which you are qualified. Most policies require that you are still under a doctors care.
Renewability Features
Non cancelable and Guaranteed renewable
This gives the policy owner the right to renew the policy at the anniversary date. The insurance company cannot increase the premium. Most policies set a limit to this feature. It generally ends at age 65. At that point it changes to “guaranteed renewable” only.
Guaranteed renewable
This gives the policy owner the right to renew the policy at the anniversary date. The insurance company has the right to change premiums for all insured of the same class.
Have you considered what would happen if you could not work due to a disabling sickness or injury?
It is hard to predict what the future can hold. But consider this:
Statistics of the probability of becoming disabled during your working years are staggering.
According to the U.S. Census Bureau Survey findings, the likelihood of becoming disabled increases as you age.
The chance of an individual becoming disabled during their working years is three times greater than their risk of death.
