Best Disability Insurance

FAQs

 

Who needs disability insurance?

If your plans for the future are reliant on your income, losing that income could devastate any plans you have.  Your income is your greatest asset, and it is important to fully protect it like you would any other important asset you have.

 

When should I purchase disability insurance?

Purchasing disability insurance while you are young and healthy will save you the most money.  But, no matter what age you are, if you have an income it is critical that you protect it immediately.

 

How much will coverage cost?

While this answer varies by company, by quality of contract, and by selection of riders, it is even more influenced by age.  On average, you can expect to pay between 1% – 4% of your annual income.  The reason for this is due to the statistical frequency of claims and use of disability benefits.

  

How much benefit should I have?

You should protect your income at the maximum level offered.

 

How much benefit can I have?

No insurance company will insure 100% of your income because you would have no incentive to continue working.  You can expect to protect between 50% – 70% of your income.

  

What options should I consider?

Each company will offer different riders, but most have the following options we typically recommend:

•  Non-Cancellable, Guaranteed Renewable: Included as part of the contract with most quality carriers, this terminology basically states that as long as you pay your premiums, the insurance company cannot change the terms of the contract or raise premiums on you. 
•  Own Occupation: Quality carriers will include a true own occupation definition in the contract, but some companies will require you to select it by rider.  It is important to have an own occupation definition that will allow you to be gainfully employed in a different occupation and still receive a benefit from your contract because you can’t perform the material and substantial duties of you own occupation at the time of disability.
•  Lifetime Benefits Rider: Very few carriers still offer this option.  As yourself the question, if you become disabled how long do you want to get paid?  If the answer is forever, or for as long as you are disabled, you should consider the lifetime benefits rider.  Otherwise, you can choose a benefit period such as to Age 65 or to Age 67.
•  Presumptive Disability: Included as part of the contract with most quality carriers, this clause says that if you suffer total and complete loss of:

– sight in both eyes
– hearing in both ears
– ability to speak
– the use of both hands, both feet, or one hand and one foot, in their entirety

then you will be presumed totally 100% disabled and the Elimination Period will be waived.  Basically you would get paid from Day 1 of the disability.  The “catch” is found in the small details of each contract.  Beware of contracts that require this loss to be irrecoverable.  Many times this feature is used with young people involving things like broken bones from accidents.  Broken bones are repairable, so a policy that requires the loss to be irrecoverable would not pay immediately in a case like that but would require you to satisfy the Elimination Period.

 

• Residual Disability Rider: Under a residual disability rider, an insured receives a percentage of his or her disability benefit based on the percentage of income loss the sickness or injury has caused.  Without this rider, it’s all or none – you have to be totally 100% disabled to received your benefit.  Over 90% of claims are residual (or partial) claims.
•  Mental/Nervous Provision: This provision will be in every policy contract, but it will vary from company to company.  It is important to choose a policy that will not limit payment of benefits if they are related to mental/nervous issues.  Some companies will limit the payment of benefits to 12 months, 24 months, or 36 months.  Quality contracts will not limit payments, but rather they will pay benefits for a mental/nervous claim just like any other claim for the normal stated Benefit Period of the contract, for example to Age 65.
• Cost of Living Adjustment (COLA): Individual disability income policies generally offer a cost of living rider that will adjust benefits for inflation during a long-term claim.  Typically, it is sufficient to choose a 3% cost of living adjustment.  Without this rider, benefits will remain flat and will pay for less and less over time as inflation and cost of living increases.  The difference between having this feature or not can potentially be millions of dollars in payable benefits.
• Future Increase Option (FIO) Rider: This feature locks-in your health and insurability for the future.  As your income goes up, you will need to increase your benefit amount to keep pace with your income.  This feature allows you to purchase additional benefit up to a stated age without proving your health or insurability again.  You only need to provide documented proof of your income.
• Maternity: Most all companies will cover disabilities caused by complications resulting from pregnancy or childbirth.  However, most companies will NOT cover disabilities resulting from normal pregnancy issues.  The biggest example is back pain.  While you still must satisfy the normal Elimination Period (usually 90 days), you can collect a claim benefit afterward if it is not excluded.  Very few companies will currently cover normal maternity, but it is important to ask.

 

How do I determine the correct Elimination Period?

Individual disability insurance policies contain an elimination or “waiting period” during which no benefits are payable. Generally, you have a choice of waiting periods ranging from 30 days to one year. The longer the waiting period, the lower the cost of the plan. You should determine how long you can be without an income, based on your savings and other sources of income. The standard Elimination Period chosen is usually 90 Days.

 

How do I compare policies from different companies?

The only real way to evaluate any policy is by reviewing the ACTUAL contract language in the policy contract.  Specimen policies are available from each company on our website.  Putting actual policy contracts side-by-side to compare each feature in the policy is the best way to compare them.

 

If I have a group disability insurance policy, do I also need an individual disability insurance policy?

Group disability insurance is nice because it is cheap, but with lower price comes a lower quality contract.  Group disability insurance is typically very “bare-bones” coverage and does not contain all of the special features you would want in a quality policy of your own.  Also, if you leave the employer you are with, you usually cannot take the Group Policy with you, you will lose the coverage, and you may be forced to apply for individual coverage at an older age at a higher premium.  Most importantly to note, if Group disability insurance is free to you and paid by your employer, the benefit will be taxable.  Individually owned policies pay benefits tax free since they are paid with after-tax dollars of the owner.  Group plans are not Non-Cancellable, Guaranteed Renewable which means they can change the terms of their contract and what they cover or they can change premiums whenever they like.

 

Should I purchase disability insurance through my association?

Association plans are very similar to Group plans with their own pros and cons.  Association plans are lesser quality plans than individual plans because they cover a large group of policyholders and typically do not require extensive medical underwriting.  Therefore, they will also be less expensive than individual plans.  Association plans are not Non-Cancellable, Guaranteed Renewable which means they can change the terms of their contract and what they cover or they can change premiums whenever they like.

 

What type of medical exam is required?

The medical exam typically includes recording your height, weight, blood pressure and pulse, as well as answering several medical questions about your medical history.  The exam may also include the collection of blood, urine, oral fluid, and an EKG depending on the insurance company’s underwriting guidelines based on your age and amount of coverage. The exam can take place at your home or office, and is performed by a registered nurse at no cost to you.  The insurance company pays for the exam.  Lab test results are available to you from the insurance company upon request.

 

How long does the underwriting process take?

The application/underwriting process for disability insurance can range from 4 weeks to 3 months, typically 6-8 weeks should be expected.  Length of time can depend on how fast you schedule your exam and how quickly your medical records are received by the insurance company from your doctors.

 

When does my disability coverage begin?

Upon receiving an offer of approval from the insurance company, a policy will be issued and dated with a date you request to begin your coverage.  Upon issue, you must sign delivery requirements and receipts and pay for the first premium payment in order to put the policy in-force.  Your coverage begins immediately upon receipt of all these requirements by the insurance company.