Disability Insurance Terms
When Considering Disability Insurance, Be Familiar With The Following Terms.
Benefit Amount and Period
Disability policies pay up to 66% of your pre-disability, after tax income income dollars for a specific period of time. The benefit period can run from 2 to 5 years or until age 65.
Elimination Period
There is a waiting period known as an elimination period, before your benefit kicks in. It typically runs anywhere between 30 and 180 days, and sometimes longer when supplementing group employer coverage. You select the waiting period when you buy your policy. Opting for a longer waiting period reduces your monthly cost.
Definition of Disability
Some policies pay if you are unable to perform the specific duties of your own occupation and others pay only in you can’t work in any occupation for which you are reasonably qualified.
Residual or Partial Benefits
If you are unable to perform some aspects of your job, residual and partial benefits allow disability payments based on the amount of lost time and lost income.
Guaranteed Renewable
Your policy can’t be cancelled as long as the premiums are paid. Premiums can be raised for an entire class of policy owners but not for reasons related to your individual situation.
Non-Cancellable
These policies can never be cancelled as long as premiums are paid, and premiums are guaranteed not to increase.
Inflation Protection
A cost of living supplement feature indexes your plan with current inflation. You can add this rider to an individual disability insurance policy to increase the benefit by a specific percentage after every year of disability. This option helps to maintain your standard of living if you are out of work for an extended period of time.
Future Insurability
A future insurability option allows you to purchase additional disability insurance benefits while your policy is in force without providing further medical evidence.
