than purchasing a Disability Insurance Policy, many people
believe they can rely on Social Security and/or Workers Compensation
for protection. Unfortunately, Workers Compensation will only
cover a "job related" injury or illness and both Workers Compensation
and Social Security benefits are often inadequate.
short term disability insurance and
long term disability income insurance plans:
Disability plans pay a percentage of your income (such as 50%, 60%, etc.) as a monthly benefit. Be ready to verify your stated income with your tax return and other information they may request..
Find out how a policy defines a disability. Own-occupation
will provide a benefit if you are unable to perform the duties
of your "own occupation" (your current field of work). Any-occupation
is a lower priced plan but to receive benefits you must
be unable to work at any job.
See what the Waiting Period
options are. Usually the longer the waiting period, the
lower the premiums. However, you will need an emergency fund,
sick leave benefits etc. to support yourself during this period.
How long are benefits received? Two to five years will probably
not be sufficient. If affordable, select an option that pays
to age 65. You will then have income from social security.
Ask about Residual Benefits.
Will you receive reduced benefits if you are only able to
Look to see if the plan proposes a guaranteed
renewable or non-cancelable
policy? If non-cancelable, your premiums will not go up, however
there will almost certainly be an additional cost to have
this type of guarantee.
Can additional coverage be purchased at a future date regardless
of your health?
A cost of living rider
will assist benefit payments (after you become disabled) in
keeping pace with inflation.
Can benefit payments be coordinated with benefits received
from Social Security. This Social
Security rider could save you money.
Waiver of Premium, an
option with many plans, would allow you to quit paying premiums
once you are disabled. This could be very important to you.
Make sure the company you are considering doing business with
is Financially Sound (your broker can assist you with this).
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.
Nutshell Look at Disability
The most important definition in
the contract is the "definition" of disability.
As an insured you want this to be simple and easy to understand.
a reasonable person (you) cannot easily understand this definition
and how/when benefits are to be paid then the plan should
probably not be purchased.
If the definition appears ambiguous to you then it will be
subject to interpretation by the insurance company at claim
time. It's important to realize that the more ambiguous the
Definition of Disability, the lower the premium.
definition that favors the insured costs more money than one
that gives the insurance company an out.
next critical part of the plan is partial/residual and recovery.
Partial means that you don't ever have to be totally disabled
to collect benefits.
is included in some contracts and it is an extra rider in
others. Residual means the plan will pay you a benefit for
a partial disability. When partially disabled a good contract
internally indexes your prior earnings so that your residual
benefits can keep pace with inflation (not the same as the
The Recovery feature is how long benefits will be paid when
you are back at work full time (and still have an income loss)
after being disabled.
The Cost of Living Rider (COLA) increases the Total Disability
Benefits after one year of Disability. It provides automatic
increases in benefit to compensate for the cost of inflation.
All plans shown are "Non-Cancelable and Guaranteed Renewable
to Age 65" - this means the insurance company cannot cancel
you (except for non-payment of premium) and they must offer
renewal to Age 65.
Premiums are guaranteed to stay level to 65 unless otherwise
noted as step Rate, which is level for the initial period
and then "Steps Up" to a guaranteed level premium to age 65.
All plans waive premiums during Disability.
A strong benefits package helps
you recruit and retain valuable employees.
We help our clients tailor a program that
will fulfill both the employers' and employees' needs.
Please call HCI at 713-626-2838 or use our Contact Form.