Explanation of Disability Benefits
Disability Insurance pays you a monthly income when you become disabled due to an accident or illness. A disability policy has many factors that determine the cost. These factors include your age, occupation, and health. In addition, the cost is based on the policy features you want.
To design your policy features, you must decide on several factors:
Waiting Period - How long you wait until benefits begin. Typically the choices are 30, 60, 90, or 180 days.
Benefit Period - Once benefits begin, how long you want to receive them. Most companies offer a 2 year, 5 year, Age 65 and Age 70 benefit periods.
Monthly Benefit - Companies will allow you to purchase up to about 60% of your pre-tax income. Most people choose the maximum.
Optional Benefits - All companies offer the following coverage.
- Residual of Partial Disability Coverage
- Automatic Benefit Increase Options
- COLA Increases when Disabled
- Social Security Income Rider
The key to a quality disability policy is the Definition of Total Disability, which varies from company to company. This definition determines whether or not the company must pay.
The best policies offer an "Own Occupation" definition of disability, which means the company pays if you can't perform your occupation. This is the best definition.
A lesser definition is a policy that pays if you can't perform "Any Occupation." This premium is less expensive, but it's harder to collect.
Premiums are guaranteed to remain fixed if the policy is "Non-Cancelable."
Premiums can be raised for everyone in a target group (such as all doctors or all policy holders) if the policy is "Guaranteed Renewable." This is not recommended.
Important! - Be extremely careful when purchasing a Disability Policy. If you don't understand the benefits and definitions, your policy could be worthless! We can help you determine the best policy for you.