You have probably heard the stories of people who struggled for
years, trying to get "disability." They were trying to get disability
income from Social Security, a process that usually takes two
years and is usually denied at least twice before finally being
granted. The struggle and financial hardship could be avoided
with private disability insurance.
Understanding
disability insurance
Long term, Individual
disability insurance policies, through private companies, are
income replacement insurance plans. You will pay a premium based
on the amount of insurance you need. There will be a maximum insurance
available to you, calculated as a percentage of your average income
over the three years prior to needing the disability income payment.
You want to choose
a company that provides "true income replacement." That
deceptively simple phrase means that you will be able to collect
whenever you are unable to perform your regular job. In other
words, if your regular job requires you to stand all day, and
you are unable to do so, you would be able to collect until you
find suitable employment and no longer need the disability income.
You can own policies
from more than one company, but it is not usually to your advantage
to do so as you will not collect double. The companies will work
together to provide you with approximately the same amount of
money you would receive if only one were paying.
Why do I need disability insurance?
You have a 40 percent
chance of becoming disabled, either permanently or temporarily,
if you are under the age of 40. As you get older, the statistics
swing in your favor.
Personal Disability
can occur for surprising reasons. Most people think first of having
an accident, but more people below the age of 40 are disabled
as a result of stroke, heart attack, and diabetes than are disabled
in an accident. If you become disabled, you will still have to
eat, pay your light bill, put gas in your car, and pay your co
pays on medical bills. Plus, there may be additional expenses
such as having your laundry done, paying someone to clean your
house or prepare meals, and—if you are unable to drive—the
increased cost of public transportation to get where you need
to go.
Why don't I just wait for Social Security to pay?
Social security can
take up to two years or more before you start receiving benefits.
In addition, you have to be totally disabled in order to collect.
Also, if you are completely disabled, you may be able to collect
both Social Security Disability and disability insurance.
Isn't disability insurance part of my health insurance?
In a word, no. Some
employers have something called "short term disability" which
will give you part of your salary for a few months. Some even
have long term disability which will pay you for up to two years.
During this time, your medical expenses are covered by medical
or health insurance. If your employer does not have disability
insurance on you, and you are unable to work, you could lose your
job and your health insurance as well. Usually you will not receive
enough disability insurance income to completely pay your medical
bills, so you want to hang onto your group insurance from your
job as long as possible. If you do not have enough money to pay
for medical care, you may have to apply for Medicaid, but that
also has strict limits.
Will I get my entire salary?
No, you will get a
percentage of your salary, which will be calculated at the time
you need it. Your premium will be based on the percentage you
apply for, not on the actual amount. You want a policy that will
give at least 60% of your income, and 80% is even better if it
is available.
What can I expect in the fine print?
Terms of the policy,
including things they will not cover, will be written in the policy.
Generally, they will not pay for acts of deliberate self-injury.
Elimination period.
The elimination period is a waiting period, usually 30 to 90 days
that you will not have coverage. This waiting period reduces your
premium, but you need to put aside money to pay bills during that
period.
Most disability policies
either expire or are reduced by half as soon as you are old enough
for Medicare. Certain companies allow you to convert a disability
policy to long term care insurance with no medical underwriting
at age 65.
Waiver of premium.
Some companies charge for a waiver of premium and others include
it automatically in the policy. In the latter case, once you have
been on disability for a certain time period, your premium is
waived. Some will even return any premium you paid from the first
day that you claimed the disability.
Take advantage of the
many fine insurance agent professionals who are well able to assist
you in understanding the "fine print" of the policy.
Will I be allowed to engage in any gainful employment?
Yes, usually at least
part time, although you will need to read your policy. Some policies
will reduce your disability payment in proportion to the amount
you make on your part time job.
If you are young and
have a family, disability insurance is definitely worth consideration.
Many small businesses do not have it on their employees; it is
not the same as workman's compensation. Like all insurance, it
will be too late to apply for it once you actually need it.
How do I find good rates on disability insurance?
Just to request free, no obligation quotes
that meet your needs and budget!
