Things to Consider When Looking at Disability Insurance
Quality vs. Price
- Disability insurance protects your most valuable asset. The language in your contract (insurance policy) is very important. As mentioned in the FAQ section, all policies are not created equal. Shopping based on price alone is not a good idea because it could mean you are giving up valuable policy provisions.
- Expect to pay 1% to 4% of your income for a high quality individual policy for a good quality policy.
Look at the company ratings
- Your disability company could potentially be paying your salary for the next 20 years. It’s important that they are financially sound.
- All disability companies are rated by third party rating companies. We don’t recommend anything lower than an “A” rating by AM Best; an A+ or A++ is even better.
Make sure your policy is guaranteed renewable and non-cancelable
- This means the insurance company can never raise your rates or cancel your policy.
- This is the most important feature. It sets up the foundation of your policy so that you know the coverage you originally purchased will be the same when you may need to file a claim.
- Group and association plan benefits and definitions can be changed without your consent since they do not contain this feature.
Occupational Specific Benefits
Own Occupation definition of disability is the most liberal definition of disability. This means that if you are unable to work in your occupation or specialty due to an injury or illness the policy will pay you a benefit, even if you choose to work in another occupation. For example, if you get injured and can longer practice as an Orthopedic Surgeon but decide to teach medicine you would still qualify for your full monthly benefit with no reductions. Not all policies contain a True Own Occupation definition.
Own Occupation definition of disability is the most liberal definition of disability. This means that if you are unable to work in your occupation or specialty due to an injury or illness the policy will pay you a benefit, even if you choose to work in another occupation. For example, if you get injured and can longer practice as an Orthopedic Surgeon but decide to teach medicine you would still qualify for your full monthly benefit with no reductions. Not all policies contain a True Own Occupation definition.
Partial Disability
Many disabilities start out on a partial basis rather than a total disability basis. Partial disability is required to be on all policies in certain states such as California. Partial disability benefits will pay you if you are still working in your occupation but suffering a loss of income. The Partial Disability benefit definition is not the same on all policies. Some policies will also require a loss of time or duties in addition to a loss of income to qualify. Some policies will have a stronger partial disability benefit than others. A knowledgeable agent can help you decipher the differences.
Many disabilities start out on a partial basis rather than a total disability basis. Partial disability is required to be on all policies in certain states such as California. Partial disability benefits will pay you if you are still working in your occupation but suffering a loss of income. The Partial Disability benefit definition is not the same on all policies. Some policies will also require a loss of time or duties in addition to a loss of income to qualify. Some policies will have a stronger partial disability benefit than others. A knowledgeable agent can help you decipher the differences.
Future Increase Benefit
Many policies will contain an optional feature that will allow you to increase the amount of your benefit when your income increases, even if your health has changed. There is usually a requirement that you must be working 30 hours per week to apply for the increase.
Many policies will contain an optional feature that will allow you to increase the amount of your benefit when your income increases, even if your health has changed. There is usually a requirement that you must be working 30 hours per week to apply for the increase.
Cost of Living Adjustment
The Cost of Living Adjustment (COLA) rider is an optional benefit that adjusts your monthly disability benefit every 12 months of disability either on a fixed percentage or based on the Consumer Price Index. This is designed to keep pace with inflation in the event you are disabled for many years.
The Cost of Living Adjustment (COLA) rider is an optional benefit that adjusts your monthly disability benefit every 12 months of disability either on a fixed percentage or based on the Consumer Price Index. This is designed to keep pace with inflation in the event you are disabled for many years.
Business Overhead Expense Disability Policy
If you are a doctor or dentist who owns your own practice, you may want to consider disability overhead expense. If you were to become disabled, this policy can provide funds to help cover ongoing expenses such as rent, employee's salaries, etc., to keep the practice open during the period of disability. Few medical practices could survive if the doctor is not generating new revenue. In a very short time, the practice will either shut down or have to be sold. An overhead expense policy is made to give you the ability to cover expenses while on a disability claim and come back to an existing practice when you're able to.
If you are a doctor or dentist who owns your own practice, you may want to consider disability overhead expense. If you were to become disabled, this policy can provide funds to help cover ongoing expenses such as rent, employee's salaries, etc., to keep the practice open during the period of disability. Few medical practices could survive if the doctor is not generating new revenue. In a very short time, the practice will either shut down or have to be sold. An overhead expense policy is made to give you the ability to cover expenses while on a disability claim and come back to an existing practice when you're able to.
Other Options for Disability Income
Social Security
Qualifying for Social Security benefits is very difficult because the disability must prevent you from doing any kind of work - not just your usual job. The definition of disability for social security states that one must be completely disabled with no hope of recovery for a period of at least one year, or have a disability expected to end in death.
Worker's Compensation
Worker's Compensation only covers job related sickness or injury. In addition, these benefits are limited.
Savings, Your Family or a Bank Loan
If you saved 10% of your income each year, a one-year disability could wipe out 10 years of savings. With your savings gone, your other assets would begin to dwindle as well.
Social Security
Qualifying for Social Security benefits is very difficult because the disability must prevent you from doing any kind of work - not just your usual job. The definition of disability for social security states that one must be completely disabled with no hope of recovery for a period of at least one year, or have a disability expected to end in death.
Worker's Compensation
Worker's Compensation only covers job related sickness or injury. In addition, these benefits are limited.
Savings, Your Family or a Bank Loan
If you saved 10% of your income each year, a one-year disability could wipe out 10 years of savings. With your savings gone, your other assets would begin to dwindle as well.