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Is disability a real need?
Thank you for having me here Gary. I’m very excited to come here to talk to you and your audience about this topic, because I think of disability income insurance as sort of the forgotten child or black sheep if you will of the financial planning family.
As you have mentioned earlier, people spend money to insure their automobiles, their homes, their lives, to protect their assets and their families. They put money aside each month year marked, for college funding plans, retirement dreams, long term care insurance. But the reality is for the majority of most families, these strategies depend on their ability to earn an income to fund these plans. Without disability income insurance a family that has planned and saved diligently for years could face financial devastation. As much as we would like to believe that we’re all going to be healthy, disability is a real concern for people in their working years.
Now, many people dismiss this concern because when they think of disability they automatically assume whellchair and it is easy to think that’s not going to happen to me. But the fact is tough a disability is any illness or injury that will prevent you from doing your job for a given period of time.
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Disability insurance is something that many people do not fully understand. It is also a type of policy that is often brushed aside. People think to themselves that they are young so they do not have to worry about becoming disabled. However, the truth is that it only takes one injury to cause a person to miss work. Whether you miss work for just a couple of weeks or for several months, you will be losing a great deal of money and you will be experiencing very high medical expenses. No matter your age, disability insurance is a vital coverage you should consider.
If you have questions about this type of insurance, then you need to make sure you get them answered thoroughly before you make a purchase. Since there are different types of the coverage with different stipulations, the policies can be somewhat confusing. Below, you will find the answers, in detail, to your top four questions about disability insurance.
1. What are the main types of coverage that I can consider?
There are two policy types when it comes to insurance in the event of disability: long-term and short-term. While the two will pay for basically the same expenses, they vary in how long they will pay. Short-term insurance is designed to cover problems that only last between a few weeks to six months. Often, short-term disability insurance will cover such things as maternity leave as well. Long-term policies cover disabilities that lead to the policyholder missing work for more than six months.
The two types are different premiums, but often, it is wise to purchase both at the same time. This way, you can count on being covered no matter what may arise in the future.
2. Will the insurance cover all of my expenses during my disability?
This will depend largely on the policy that you choose. Some policies are called “total disability” meaning that they will continue to pay no matter how long your disability lasts, even if it is the rest of your life. Some policies will only cover your medical and rehabilitation costs while you miss work, while others will even pay toward living expenses. Salary compensation policies will pay the whole amount or a portion of the amount you get would get paid if you were still able to go to work.
Keep in mind that the more coverage you choose, the higher your premium cost will be. You will need to choose the policy that will best suit you in the event you are disabled while keeping in mind how much you can afford to pay for the policy each month.
3. If I have disability insurance, will it begin paying as soon as I become disabled?
Again, this will depend upon your policy. However, most of the policies will only begin to pay out after an initial waiting period. This wait time can vary from a couple of weeks to a few months. Before you choose your insurance policy, make sure you are aware of the wait time needed before you can begin receiving payouts from the insurance.
You will need to be aware that you will be responsible for paying your expenses for a short amount of time, even if you have a disability policy. However, once the policy begins to pay out, you will receive the payments according to a regular schedule.
4. Will the cost of my insurance go up over time?
As with the last two questions, this will depend upon the policy you choose. You can pay for a static premium insurance, but it will generally cost a little more each month. Policies that cost less will often go up at the very least due to inflation each year.
Before choosing your insurance policy, make sure you are aware of what the monthly premium will be and whether or not you can expect the cost to go up over time.
You cannot assume that you will never become disabled. While you hope that it will never happen, the chance always exists. Instead of taking a gamble and possibly running into financial trouble, you can ensure that you and your family will be safe if the unexpected were to happen.
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Disability insurance is a type of insurance coverage that can be very beneficial, if it is properly understood and applied. To ensure that you have the coverage you expect at your moment of need, it is important to be aware of the latest news and developments related to disability insurance. This can keep you from being inadvertently excluded from coverage and also help you make the best choice for yourself.
Unemployment Is Becoming A Factor
One element that is changing the face of disability insurance is the specter of unemployment. While most people focus on the loss of health benefits that comes with an unexpected job loss, the loss of other forms of insurance is also a serious concern. Many people are finding themselves unemployed and suddenly bereft of their disability coverage.
To counteract this phenomenon, individually owned disability policies are becoming more common. Sold by different vendors than those who work with corporate entities, these programs offer similar coverage. However, the costs may be different than you expect since your employer will no longer be covering a portion of the costs.
Individually owned disability insurance policies are expected to become every more prevalent as time goes by. Expect to see increased marketing efforts on behalf of insurance companies for both long and short term disability insurance plans. These plans should be available for term and continuous plan offerings.
Disability Status Is On The Rise
Another phenomenon currently facing the country is an increase in disability claims filing. Both independent insurers and the Social Security Administration have reported that 2007 and 2008 disability insurance claims where dramatically higher. Unable to pinpoint a rise in specific illness, many industry analysts feel that the rise in claims is being motivated by unemployment factors.
Unable to find work, individuals who may have been partially disabled or working through pain are deciding to give up on their job hunt and file for disability payments. As a result, claims offices are overwhelmed with applications for benefits. This can cause delays in benefits payments and has lengthened wait times to get questions answered by speaking with a claims representative.
Going forward, expect to see more scrutiny around disability claims. Insurers do not want to be a supplement for unemployment, and they may deny claims that do not have a strong root in true illness. Expect more questions and documentation requests.
Coverage Limits Do Apply
Along with increased scrutiny of claims, insurers are also doing more to enforce existing claims and benefit limits. This especially applies to specialty limits or exclusions, such as mental health and drug abuse related disabilities. Where coverage limits are met, benefits are cut off without further appeal. It can be frustrating, especially if you are depending on your disability insurance to get you through a financial hardship.
This is partially motivated by cost containment mechanisms. With benefits claims on the rise, it is necessary to monitor costs closely to ensure that premiums are in line with the risks being assumed. Insurers can no longer afford to bend rules or extend coverage in order to mind their own margins. They are being pinched by the economic realities just like everyone else.
Regulations Need To Be Watched
A final factor weighing in on the disability front is the ongoing health care debate. With national insurance a possibility and local governments jumping into the debate, disability insurance is being influenced and affected. This manifests itself both in changes to existing regulations and changes in the way that regulations are enforced.
As a consumer, this may impact what coverage is offered in your area. You may find that certain insurers do not wish to participate in new regulatory plans and will be leaving the area. Monitor this closely, as not all plans can be immediately transferred to another provider.
Monitoring work place regulations when all the kinks of the current health care bill are ironed out will also be important. As a consumer, it will be your responsibility to keep up with all the new changes and insure that you are protecting yourself. You may have to shift how you and your employer deal with disability insurance issues as a result.
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Disability insurance is designed to protect your lifestyle in the event that you become disabled. Though many people do not like to think about the possibility of becoming disabled, workplace accidents and health issues can result in permanent disability long before they may be prepared to stop working. Disability insurance provides income replacement and supplements government and other social programs.
Buying disability insurance can be confusing. Though there are many different companies that sell disability insurance, evaluating your options can be problematic. Policies can vary dramatically between states, regions, occupations, and even partner health providers. Reading everything twice is in your best interests to ensure that if you make a claim it will be approved.
Disability insurance is available for almost all occupations, even if you work in a perilous occupation. Some disability insurance may be offered through your employer. However, many people who buy disability insurance opt to own their own stand alone policies lest they lose coverage when they change jobs or their employer changes their benefit plan.
Information Needed For Disability Insurance Quote
To get a disability insurance quote, you need to have your personal health information and occupational information handy. You can expect to answer questions about your health history, especially if you have a pre-existing condition or a serious accident in your history.
Occupational data may be limited to basic job titles, or you may have to complete a job inventory that describes your daily tasks. This is often dependent on whether you have a white collar or a blue collar type job. Those who work with their hands or heavy equipment may need to complete additional questionnaires to get a good quote.
Common Disability Insurance Policy Features
Disability insurance covers expenses and income replacement needs in a number of ways. Some of the most common disability insurance policy features are:
- Income replacement. Disability insurance offers tax free income replacement in the event that you are disabled, and you can opt for different levels of replacement based on your personal needs. Coverage of up to 80% is generally available.
- Elimination periods. These are waiting periods that apply before you can start to receive benefits. You can choose the length of your elimination period, with lower premiums available to those who choose longer elimination periods.
- Residual benefits. These benefits are payments if you are only partially disabled, but you can still do some work. These may require some documentation to receive.
- Cost of living adjustments. Rather than a flat payment based on your income at the time you became disabled, cost of living adjustments in your disability insurance policy help you keep pace with inflation during your benefit period.
- Relapse coverage. If you are temporarily disabled, recover, but then have a relapse, this coverage pays out. In most cases, there will be no waiting period on this coverage.
Disability Insurance Discounts Available
Getting a discount on disability is possible if you bundle coverage with other health and wellness policies. You may also receive discounts if you have multiple family members on one disability plan.
Disability Insurance Exclusions To Note
Disability insurance exclusions can take the form of out and out exclusions and also limitations on benefits. These can dramatically change the benefit and value of your coverage.
You need to read carefully to determine what your limits may be to ensure you have the coverage you truly desire. The most common exclusions and limitations on disability insurance are:
- Mental and Nervous exclusions. These exclusions may explicitly deny coverage for mental and nervous disabilities, or they may cap benefit periods. One of the most common exclusion features is a two year benefit cap on mental and nervous disabilities.
- Alcohol and Drug exclusions. If your disability is the result of alcohol or drug abuse, it may not be covered. Alternatively, a one year cap on benefit coverage may apply.
- Criminal disability. If you are disabled while committing a crime, you will not receive coverage.
- Acts of war exclusion. This exclusion is less common, but you may want to look for it in your policy. Essentially, if you are injured in an act of war, you will not be able to claim for benefits.
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We all know how important health and life insurance is. We also know the need for homeowner’s insurance and vehicle policies. All of these insurances are vital for our well-being, and some of them are even required by law. However, have you taken the time to think about disability insurance? Many people do not put as much stock into this equally important type of coverage.
Insurance is by design a way to help protect you from various extreme expenses by paying the bulk of the cost. For example, health insurance will pay a percentage of medical bills and will often pay in full for certain types of medical treatments. Health insurance alone can save a person thousands of dollars. You most likely have a good understanding of what insurance is and how different types of policies work.
Disability insurance is much just the same as it sounds. It is a policy made to protect you if you were to become disabled for a long or short amount of time. However, there is much more to the policy than this basic definition. The insurance type is certainly something a person should consider in order to protect themselves and there family. However, just as with anything that will include an ongoing cost and commitment, it is important that you understand how this insurance works.
This type of policy is made to offset and pay for expenses that accrue when the policyholder cannot work due to injury or some other sort of disability. The insurance policy will help to pay for medical fees and rehabilitation expenses. Some disability insurance plans will even help pay for regular cost of living bills while the patient cannot work.
There are two types of this insurance. Often, it is important to make the decision to be covered for each type. The first is short-term disability. This type is designed to cover incidents that cause a person to miss work for less than six months and more than two weeks. This type of policy will often cover such short-term disabilities as maternity leave or minor work injuries. This type of coverage is important no matter what age you are.
The other type of coverage is called long-term disability. Designed to pay for expenses, which cause a person to miss work for more than six months, this policy is often favored by people who are middle aged or older. However, choosing to purchase a long-term policy could be very important were you to find yourself disabled for a long amount of time, no matter how old you are.
Why should you get disability insurance? Consider this. If you are the head of the household and you are supporting your family, there is more than one person depending upon your income. For the sake of this discussion, let us say you have two small children and a spouse. If you were to be injured and you could not work, what would happen to your family? Would there be enough income to buy groceries? Would you have enough money saved to pay for everyday expenses as well as the medical expenses you may incur? Chances are, you do not. Instead of taking risks with the welfare of your family, you should consider making sure you are properly covered with disability insurance.
When you begin shopping for the right policy, there are a number of things that you should consider. For example, you will need to determine if there are any exclusions to the policy. Some insurance coverages will handle any disability all the way to permanent issues. Others will have specific exclusions and time limits. In addition, you will want to look for renewal options for the insurance from year to year. Some policies are guaranteed renewable making sure you do not lose the insurance when you need it the most.
When you are thinking about the insurance coverage that you need, you most likely immediately think of health, life, auto, and home insurance. However, you cannot forget about disability, which could truly be a vital policy were you to ever experience a disability in the future. With the two different types of policies available, you can choose to be covered by one or both in order to properly protect yourself and your family.
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