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 | Comments (1)

The Biggest Problem with Disability Insurance

It is my opinion that the biggest problem with disability insurance is how insurance companies define “your job.” Disability coverage is designed to provide income to the insured in the event they become disabled and are no longer able to perform their job duties. The definitions range from unable to do any job to unable to do the specific job for which you are trained or currently engaged in.

Obviously it’s to your advantage to purchase a policy which provides protection to you when you are unable to perform any type of work at all. The company can’t suggest that you try a different line of work or deny benefits because they think you could work in any type of job doing whatever.

A policy which provides coverage only if you are unable to perform your current job is usually recommended. You might not be able to do your old job but there may be other types of work you could do. The company can not deny benefits because you are unwilling to perform a different type of work.

There are variations on these two extremes. Professionals, such as surgeons, obviously probably don’t want to perform other types of work if they become disabled. This probably is not as important for the less educated or less skilled worker. The most important thing is to ask lots of questions before you purchase a policy. Make sure you understand the company’s definition of work and how your coverage works. Disability is difficult enough to deal with. It’s even worse if you believe you have coverage, only to find out that you don’t.

Margaret Norton, a Personal Life Coach/Writer/Speaker, lives in St. Peters, Mo.

(photo credit: spunter)

April 9th, 2009 by admin | Posted in Disability Insurance | Comments (0)