Disability Insurance
     for Individuals and Corporations

Several items need to be considered when evaluating numerous individual disability insurance rate comparison quotes:

What are the odds of actually having either a short term or long term disability insurance claim?

According to recent statistics, the risk associated with your becoming disabled (for 90 days or longer) are greater than the likelihood of premature death.

Unfortunately, many people think they can count on Social Security and/or Workers Compensation for protection rather than buy a Disability Income Insurance protection. The truth is, Workers Compensation applies only to "work related" injury or illness and both Workers Compensation and Social Security benefits, when available, still fall far short of meeting the actual need.

What to look for when comparing short term disability insurance and long term disability income insurance plans:

Know that most plans will only replace up to 60% of your income. Make sure your coverage percentage is in that range. Don't expect the insurance company to take your word for how much money you make. You will be expected to substantiate your claim with proof of income documentation.

How your policy defines disability is a major issue. An "Own-occupation" definition provides benefits if you are unable to perform the substantial duties of your "own occupation" (your current line of work). An "Any-occupation" definition only provides benefits if you are unable to work at any job, although the cost of the policy may be lower.

Reichek Financial can help set up and administer Disability Insurance as a part of your total benefits package easy! No package is complete without it.Rather than charge a deductible, disability income policies include a Waiting Period, a period of time when you are disabled but benefits are not payable yet. Typically, longer waiting periods mean lower policy premiums. Effective financial planning requires that you must always maintain an emergency fund to see you through any waiting period you select. Potentially available sick leave benefits and the existence of short term disability coverage are other factors to consider in deciding what waiting periods you should choose. Short term benefits usually become effective immediately if injured and most have a one week waiting period if you become ill. Typically short term benefits are payable for 90 days. Long term benefits are timed to begin as short term benefits run out.

How long do I need long term benefits to last? Although benefits periods lasting two to five years are available and are less expensive, oftentimes they are not sufficient. If you can afford it, benefits payable "to Age 65" allow your income needs to be met until social security benefits would be normally available.

Another item to investigate is that availability of "Residual Benefits". If eventually you are able to only return to work part-time, will a reduced benefit to make you whole be paid? Do you have to be fully disabled and on claim first to receive residual benefits? It is important that you know and compare how and when and if these types of benefits are payable.

Consider whether your policies under consideration are guaranteed renewable or non-cancelable. These attributes mean your premiums will not go increase, however there will be additional cost to have these type of guarantee.

Will the policy allow additional coverage to be bought in the future date regardless of your health?

Cost of living riders will increase benefits payable over time and allow you to keep pace with inflation. Younger insured's should strongly consider these alternatives.

Does the policy allow or require benefit payments be coordinated with any benefits received from Social Security. Including a Social Security rider could save you money. Some policies benefits are reduced if social security disability benefits are paid.

Waiver of Premium, an available option with many plans, allows you to quit paying premiums once you are disabled.

As with any policy, you need to be sure the companies you are considering doing business with are financially solid (RFS will assist you in evaluating carriers financial strength and stability). You don't want to be looking for another policy later in life (when you are older and possibly not as healthy) because the company had financial setbacks.

Disability in a Nutshell

Pay attention to the policies "definition of disability". Insure this most important facet of your coverage is simple and easy to understand.

A reasonably intelligent person (you) should be able to easily understand this definition as well as specifically when and how benefits are to be paid. If this is not the case, the policy being evaluated probably should not be bought.

If the definition is unclear now, come claim time, it will be subject to interpretation by the insurance company and probably not in your favor. As a general guideline, the more subject to interpretation the definition of disability is, the lower the policy cost and possibly to lesser the chance of collecting benefits.

A definition that is clear and favors the insured costs more. Unclear definitions that may be subject to interpretation and possibly offer insurance companies opportunities to limit claims cost less. The old saying "you get what you pay for" still holds true.

Policy provisions offering "partial benefits" or "residual benefits" are also very important. "Partial benefits" means that you don't ever have to be totally disabled to collect benefits. Many times doctors will require reduced work schedules to avoid worsening a bad situation. Will your employer pay you your full salary even if you work less hours? It would be important to know in advance if your selected disability income policy make up the shortfall?

"Residual benefits" on the other hand means the plan will pay you a benefit for a remaining partial disability. Rather than a reduced schedule to avoid worsening a bad situation, suppose with rehabilitation you can go back to work but then only part time or due to your disability, you can work, but perhaps in a lesser capacity than before and at a lesser salary. Maybe before you were a higher paid supervisor but now due to a less stressful job requirement, you no longer have supervisory responsibilities and are compensated less as a result. Will your policy make up the difference? In these instances, will your policy keep up with inflation? Better policies internally index your prior earnings allowing your residual benefits to keep pace with inflation (this is not the same and shouldn't be confused with a Cost Of Living Adjustment (COLA) Rider).

Cost of Living Riders (COLA) increases the Total Disability Benefits paid under the policy. This rider provides automatic increases in payable benefits to compensate for the cost of inflation.

Does your policy offer a "Recovery feature"? This feature determines if and for how long benefits would be paid after you return to work full time (yet still have an income loss) after being disabled. It allows you time to "get back in the swing of things".

Is your plan of choice "Non-Cancelable and Guaranteed Renewable to Age 65"? - if so, your policy cannot be cancelled except for non=-payment of premium and coverage renewal must be offered until you turn 65 years old (normal retirement age).

What about premiums? Are they guaranteed to stay constant to age 65? Just because your policy is guaranteed renewable, at what cost? Unless otherwise noted as "Step Rate", which means your premiums stay level for an initial period and then increase or "Step Up" to a guaranteed level premium to age 65. It is important that these items be considered and weighed carefully. You should also be sure your plan will waive premiums during disability, most do but again, it is important that you know in advance how these items are covered under any policies you may consider.

 
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