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Disability

DISABILITY INCOME INSURANCE

Most people have insurance coverage on their homes, autos, etc., but many have not realized that the value of their future earnings may far exceed the value of their tangible assets. If their future earnings cease because of accident or illness, this loss of income could present serious financial problems. Insurance studies suggest that the odds of a disability lasting for 90 days or more are much greater than the odds of dying before age 65. Disability Income insurance policies can replace this possible loss of income during one's working years. Some features of these policies can include:

A. Non-cancellable, guaranteed renewal of the policy premiums.

B. Protection against inflation for future benefits paid.

C. Various elimination periods before benefits begin (typically 30, 60, or 90 days; 6 months; or one year). The longer the waiting period, the lower the premium for the policy. A person's liquid reserves and income should be considered when selecting the elimination period.

D. The policy definitions of disability vary. Some policies provide "Own Occupation" definitions and will pay benefits if the insured is unable to work in his or her specialized field, such as a dentist or surgeon.

E. Varying benefit periods. Some policies, for example, offer a lifetime benefit where the disability was caused by an accident, and to age 65 for disability caused by illness. Disability can last for a long time. The longer the period covered by the policy, the larger the premium.

F. Some policies pay benefits when earnings drop by a certain percentage due to a disability. Others require a physician's certification to pay/continue benefits. Also, some policies provide for partial, or residual disability benefits where the insured can perform some, but not all of his or her duties. Policy language/provisions should be carefully reviewed.

G. What is the dollar amount of the disability benefit? Is the benefit based on a percentage of earnings before disability or is there a fixed dollar amount payable each month during disability?

H. Disability policies may be purchased by an individual or by a company; some may be acquired on a group basis.

I. Other types of Disability Insurance contracts include: Key Man or Key Woman Disability Insurance When the employer owns the policy, the insurance benefits can provide reimbursement for the loss of the services of a disabled employee, and provide funds to hire and train a replacement. Disability Buy-Out Funds can be provided to effect a buy-out of a disabled owner of a business under the terms of a Buy-Sell agreement. Business Overhead Expense If a business owner or professional becomes disabled, these policies can provide funds to cover ongoing expenses such as rent, employee salaries, etc., to keep the owner's business/office open during the period of disability.