May is Disability Insurance Awareness Month. How much do you know about disability insurance? We’re looking at some of the most frequently asked questions (and their answers):
Who Should Buy Disability Insurance?
Anyone who depends on their earned income for financial security.
What are the Types of Disability Insurance?
Employer paid “group coverage” comes in two types:
1. Short Term Disability (STD): These policies have a waiting period of 0 to 14 days with a maximum benefit of no longer than two years.
2. Long Term Disability (LTD): These policies have a waiting period of several weeks to several months with a maximum benefit period ranging from a few years to the rest of your life.
Employers often (but not always) offer both of these types of coverage, with short term disability benefits kicking in first and then being replaced by long term disability benefits for long term illnesses or injuries.
What Affects the Cost of My Premium?
There are several factors that will affect the cost of premiums, for example:
Age: Premiums are generally lower the younger you are.
Health History: The more medical problems you’ve had in the past, the more potential causes of a future disability claim, resulting in a higher premium.
Occupation: If your job is physically demanding or carries a high risk of injury, you will generally pay higher premiums than those with less dangerous or physically demanding occupations.
Current Income: The higher your current income, the higher the amount of money you would expect to receive in benefits, which means your policy will be more expensive.
What Should I Look For?
There are five main factors you should consider when evaluating your plan:
When payments for a disability would begin (elimination period): Most long term disability policies do not begin paying benefits immediately--the time you must wait for benefits to begin is known as the “elimination period”. The most common elimination period lengths are 30 days, 90 days, or six months after a disability occurs.
A longer elimination period typically means a lower premium, so it’s often best to get the longest elimination period you think you can survive without an income. Your insurance agent can help you to make the right decision for your needs.
How long payments would last (maximum benefit period): Similar to the elimination period, your policy will also specify the maximum length of time benefits can last. Typical options are two years, five years, 10 years, or until retirement. The longer the maximum benefit period, the higher the premium will be, but the better you’ll be protected.
How much of your income would be replaced: A disability insurance policy generally will not replace all of your income. Policies typically range from 40% to 65% of your pre-disability earnings at the time of purchase.
What disabilities are covered: Every policy will have a “definition of disability” that explains what must happen in order for you to qualify for benefits. The most common types are:
Own occupation: A policy with an own occupation definition will pay benefits if your disability stops you from doing the job you had at the time of disability.
Any occupation: A policy with an any occupation definition will pay benefits if your disability prevents you from doing any work for which your education and experience are appropriate.
Contact The Reis Group today to learn more about available group insurance policies, including disability insurance.