Disability Insurance Terminology

Disability insurance provides protection for your most valuable asset: your ability to earn a living. A long-term disability could cause catastrophic consequences for an individual and their family. Types of policies vary greatly by company. Before you make an informed choice you should understand some of the terms used in disability policies.

• Disability Income: Replaces a portion of earned income lost due to a total or partial disability.
• Interim Term: For individuals in a group disability plan, interim term is the time between the illness or accident (usually a short-term amount is paid) until you qualify for company-sponsored coverage.
• Key-Person Disability: Coverage provides a financial benefit to a company in the event a key-employee is disabled.
• Buy-Out Coverage: Helps fund a disability buy-out if a key-employee is disabled. This is paid in a lump-sum or installments.
• Overhead Expense: Reimburses a business owner for covered overhead expenses of the business that continue while the owner is partially or totally disabled.
• Group Disability Insurance: Purchased by an employer to protect the employees from loss of income due to a disability.
• Small Group Short-Term Disability: Usually available to companies with three to nine employees. It provides weekly benefits to employees, in the event of a disability, for up to 26 weeks.
• Small Group Long-Term Disability: Available to companies with three to nine employees. It provides weekly benefits to employees lasting longer than 13 or 26 weeks.
• Long-Term Disability: The definition is the same as above except it is for companies having ten or more employees.
• Non-Cancellable: A non-cancellable policy can not be changed by the company. The premium and coverage is guaranteed once the policy is issued.
• Guaranteed Renewable: A guaranteed renewable policy can not be canceled nor have its terms (except for premiums) changed by the Company.
• Beginning Date: Days are not always measured consecutively with disability coverage. Sometimes it depends upon the type of illness or accident.
• Benefit Period: The amount of time benefits are paid out to a disabled person. Varies by company but is usually one to five years.

Margaret Norton

(photo credit: eye2eye)

April 11th, 2009 by admin | Posted in Disability Insurance | (50)