Disability Insurance

Disability Insurance Information

What are the types of disability insurance?

There are two types of disability policies: Short-Term Disability (STD) and Long-Term Disability (LTD):

  1. Short-Term Disability policies (STD) have a waiting period of 0 to 14 days with a maximum benefit period of no longer than two years. This is a benefit that needs to be offered by an employer, and has guaranteed insurability during the first 30 days of hire.

  2. Long-Term Disability policies (LTD) have a waiting period of 30 days to 2 years with a benefit period ranging from 2 years to the end of your working years.

Important, standardized terms to understand when purchasing disability insurance.

  1. Non-cancelable means the policy cannot be canceled by the insurance company, except for nonpayment of premiums. This gives you the right to renew the policy every year without an increase in the premium or a reduction in benefits.  Simply stated, this is the protection from future rate increases.
  2. Guaranteed renewable gives you the right to renew the policy with the same benefits and not have the policy canceled by the company. However, your insurer has the right to increase your premiums as long as it does so for all other policyholders in the same rating class as you.

Riders that may be included or added at additional cost dependent upon the insurer.

  • Own Occupation
    Own Occupation means the occupation or occupations which you are regularly engaged in at the time Disability begins.  If you have limited your practice to a professionally recognized specialty in medicine or law, then that specialty will be deemed your Own Occupation.

  • Residual or partial disability rider
    I believe this is one of the most important riders of a disability policy. This provision allows you to return to work part-time, collect part of your salary and receive a partial disability payment if you can return to work, but at a lower rate or amount of time. Individual contracts will define the percentage of disability remaining for this benefit to be paid.

  • Cost of living adjustment (COLA)
    The COLA increases your disability benefits, once activated, based on the increased cost of living measured by the Consumer Price Index. The maximum rate of increase is identified in the contract.

  • Return of premium
    This provision requires the insurance company to refund part of your premium if no claims are made for a specific period of time declared in the policy.

  • Waiver of premium provision
    This clause means that you do not have to pay premiums on the policy after you’re disabled for a specified period of time.

  • Future Purchase Option Benefit
    This benefit allows future purchase of increasing benefit based on increasing income.  This contract identifies the allowable increase and total increase as well as the maximum age that the rider will be in effect.

  • Catastrophic Disability Benefit Rider
    This is essentially a long term care benefit rider. If one needs hands-on with two specified daily living skills or has a severe cognitive impairment, this rider will pay an additional monthly benefit.

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