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Disability Insurance vs. The Federal Employees Retirement System FERS

Dean A. Schachter

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Congress created the Federal Employees Retirement System (FERS) in 1986, and it became effective on January 1, 1987. Since that time, new Federal civilian employees who have retirement coverage are covered by FERS.

If you are a federal employee you are enrolled in FERS for your Social Security and Retirement benefits.

So how does this affect a personal Disability policy?

If you become disabled the FERS plan can be converted into a disability policy. So when calculating how much disability insurance you can purchase as an individual, you must reduce the maximum benefit by how much you already have elsewhere (other personal policies, group disability AND the FERS benefits)

Since FERS is hard to calculate at any given time, companies have preset rules, such as:

No DI coverage if in FERS

Treating FERS like a group benefit.

Reducing the amount of DI you can buy based on how many years you’ve been in FERS.

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How Does Social Security & Woker's Comp. affect Disability Insurance Claims?

Dean A. Schachter

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Generally, Disability Insurance claims do not affect Social Security Disability claims or Workmen's Compensation claims and vice versa.

The only exception on the disability claim is if one of your policy benefits is SSDI, which is reduced or eliminated if you collect from Social Security.

 

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Top 3 Disability Income Mistakes - Part 3: Rejecting a Good Offer

Dean A. Schachter

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Everyone wants the best offer possible, no matter what they buy. This is always true when someone buys any type of insurance policy.

Most people do not understand the underwriting process and believe that no matter what the circumstances they are entitled to the best policy.

Examples: People with bad driving records don’t want to pay extra. Those in bad health still want the lowest cost life insurance.

When a company makes an offer on a disability application the insured should not just reject it outright but should review the offer and try to understand why the underwriter made the offer.

When evaluating a disability offer with an exclusion or rating (increased premium) you should consider ALL the ways you can become disabled, not just the one way that is excluded. Also, companies are usually willing to review and remove an exclusion or rating three years after it is issued, assuming the insured is in the same or better health.

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Top 3 Disability Income Mistakes - Part 2: Trying to be smarter than your Insurance Agent

Dean A. Schachter

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When shopping for a Disability Insurance policy some people want to understand everything about the policy. That’s fine, unless you try to become more knowledgeable than your agent. That’s almost impossible to do.

While most insurance agents don’t sell Disability Policies, those who do are very good at it and you should rely on their expertise.

As an example, would you diagnose a problem with your car and then fix it yourself or tell your mechanic how to fix it?

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Top 3 Disability Income Mistakes - Part 1: Trying to get the best deal

Dean A. Schachter

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Those not familiar with the cost-benefits of a disability policy think that all policies are the same, thus the lower premium is the best policy. Can this be true? of course not!

The old saying “you get what you pay for” is never truer than here.

If you shop for a policy and the major factors (monthly benefit, Elimination period, Benefit period, definition of total disability and all the riders) are the same, then price can be an important factor and one you can use to decide. If these factors are different then you must weigh the differences when looking at price.

Example: Two policies are identical except for the definition of disability. One policy is Own Occupation and the other is Any Occupation. If the cost is close then always choose the Own Occupation Policy.

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