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Individual Disability Insurance FAQ's

What is disability income insurance?

Disability income insurance is a type of insurance that replaces a portion of your income if you should be come disabled. It is sometimes provided by an employer in two forms, short term disability insurance and long term disability insurance.

What is the difference between short term disability insurance and long term disability insurance?

Short term disability insurance is often simply a clause that allows you a week or two of continuous sick leave. Long term disability insurance can provide from several months to 2 years. Very few companies provide insurance that replaces your income for longer than two years.

Why do I need personal disability insurance?

The insurance provided by your employer is limited and is not guaranteed. That is, your employer can stop carrying it or sign up for a shorter term and more stringent benefits anytime he chooses. Furthermore, if you become disabled, it is not likely that fate will wait until you are close to 65 before striking. According to the “Commissioner's Individual Disability Table” of 1985, at the age of 32 you are 6 times more likely to become disabled than you are to die.

What is the purpose of the disability clause on my life insurance?

That just pays your life insurance premium so your life insurance doesn't lapse if you become disabled. It doesn't give you an income.

Does my health insurance provide disability benefits?

Usually, no. Your health insurance pays your doctor and hospital; however, you must continue to pay the premium even for that to work. A disability income insurance provides you with an income that may make it possible for you to keep the other insurance benefits that you and your family count on.

Can I sign up whenever I want to?

Although disability income insurance is very important, it is also the most difficult of all insurance polices to obtain. Underwriting is very strict, and many people who apply do not get exactly the type of policy they would like. Thus, it is very important to purchase this insurance while you have the fewest possible health issues and have an occupation that is not considered overly hazardous.

What do I look for in a disability income (DI) insurance?

The primary differences in DI policies is in the definition of disability. It is very important that you have your agent explain the company’s choice of definition as a less expensive policy may be so rigidly defined that it is almost impossible to use it.  For example, the Social Security definition is the most rigid, which is why most people who try to get SS disability appeal for 4 years or more and even then are often denied. Within the private insurance industry, the most rigid is the any occupation definition, often referred to as ‘any occ.” Under this definition, a person must be unable to perform any occupation. This definition makes no allowance for the fact that many employers will not hire a person with a disability due to their own fears of liability. If a person is able to work at “any” occupation, even though he is unable to find work, the policy will not pay.

The most liberal definition of disability is the own occupation definition or “own occ.” Under this definition, a person can collect benefits if he is simply unable to perform his own occupation. Some companies even use a split definition under which a person collect benefits for a limited time if he is unable to perform his or her own occupation. During this time, he can train for a new job. Once the training is completed, the benefit will be gradually reduced and finally terminated if the individual does not return to work.

What is meant by “benefit period”?

The benefit period is the maximum number of months or years that a policy will pay. Individuals in low risk jobs such as office jobs, management jobs or other white collar occupations will usually be able to obtain the longest benefit periods, which may even last until age 65-67. People in blue collar occupations are often limited to five year or shorter benefit periods. Furthermore, the cause of the disability can affect the benefit period. For example some contracts provide lifetime benefits if the disability is caused by an accident but a shorter period if it is caused by illness.

What is an elimination period?

The elimination period is a waiting period, usually three months, before you can begin collecting benefits after you become disabled. Since most contracts do have an elimination period, it is important to have a large enough savings to pay the family bills during this period.  Usually, however, your premium for the elimination period is refunded.

What is a probation period?

The probation period—which is different from the elimination period—is simply a length of time that the policy must be in force before it covers the individual. This prevents a person from purchasing a disability policy after he or she suspects they will soon have a disability.

If I am able to return to work, but become disabled again in the future, will I be able to collect a second time?

Yes, providing your policy has a guaranteed renewability clause.

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