Why do we need a disability awareness month?
Agents found that there was a huge gap between their knowledge of disabilities statistics and that of their clients. Before the initial 2007 campaign, most insurance clients pooh-poohed the idea, especially if they were in peak health or in their younger years.
The truth, however, is that disabilities are much more common than you might think. Did you know that one in five adults in the U.S. has a disability, according to the Center for Disease Control (CDC)?
Insurance agents saw that their clients were eager to insure their cars and other property, but not the very thing that would allow them to afford those items—their income—in case they developed a disability.
According to the Council for Disability Awareness (CDA), over one in four twenty-year-olds today will develop a disabling condition that will take them out of work for at least one year. For most people, a year’s salary is well over what they’d spend on a new car, yet they don’t worry about insuring that income while they’re happy to fork over a lot of money to pay for collision and comprehensive insurance for their car.
The stats get even more grim. If you’re depending on Social Security’s disability provision (SSDI), forget about it. The income you’ll receive—if you’re even accepted—will put you well below the poverty line if you have more than one person in your household. And, only 34 percent of all SSDI applicants receive approval.
Getting disability insurance can keep you from bankruptcy.
Getting disability insurance is one of the wisest financial moves you can make, says Forbes’ Peter Lazaroff. With statistics like those the CDA cited, we tend to agree.
How do you qualify for a disability insurance claim?
Let’s say you make a wise move and buy disability insurance. How do you qualify for a claim?
First, you need to file your claim as soon as possible after your physician gives you the news that you won’t be able to work for a certain period. Often, policies have deadlines for filing claims, so it pays to be proactive.
To qualify for benefits, you’ll need to submit a claim packet, which is a set of forms that you, your physician, and your employer will fill out. Their statements will determine whether or not you meet your policy’s definition of “disability.”
For most policies, there is an elimination period—usually 90 days—before you will receive benefit payments if your insurance company approves your claim. You may, of course, appeal if the company denies your claim.
Different types of disability insurance have varied rules for benefit recipients. The two main types are:
- Own-occupation policies: If your policy is an own-occupation policy, you will receive benefits if you can’t do your current job but could perform other work. For instance, if you were a pilot and lost partial eyesight, you might be able to teach student pilots in the classroom.
- Any-occupation policies: If your policy is an any-occupation policy, you usually can’t claim benefits if you can do other work, even if it’s for lower pay.
Do disability insurance benefits expire?
If you purchased only a short-term disability insurance policy, your benefits will expire, usually in a few months. Most people choose a long-term policy, in which benefits usually last until retirement or as long as you have the disabling condition.
Can you renew disability insurance?
Renewability depends on the type of policy you purchased. If you purchased a non-cancelable policy, your company cannot cancel it or change the rates as long as you pay your premiums on time. If, however, you purchased a guaranteed renewable policy, the company cannot change your terms, but they can change your rates. If you bought an optionally renewable policy, the company can cancel it when it comes time to renew. It can even require that you undergo physical examinations to qualify again. It pays to ask these questions before you buy a policy so there are no nasty surprises when you need to renew.
If you get better and then become disabled again, will you qualify for benefits?
Again, that depends on your policy. If you have a non-cancelable policy, the answer is yes, as long as you keep up with your premium payments. With a guaranteed renewable policy, the answer is yes—but your rates might go up. An optionally renewable policy, though, will probably not allow you to re-qualify when it comes time to renew. At the very least, it will probably have an exclusion for the condition that caused the first disability.
What types of families and households need disability insurance?
If your work contributes a good chunk of your household income, it pays to have coverage. Every person in the household whose income is a vital part of maintaining the family’s lifestyle should protect themselves from income loss in case of a disability.
Should I add disability insurance onto my life insurance policy or buy a stand-alone policy?
If your budget doesn’t allow you to buy a stand-alone disability insurance policy, a rider on a life insurance policy is a good way to protect your income in case you become disabled. These policies, though, often cap your benefits after a certain time. The bonus, though, is that you won’t have to pay premiums for your life insurance policy while you receive the benefits.
Since a disability rider doesn’t provide the same robust coverage as a stand-alone policy, you might want to consider purchasing a stand-alone policy when you can afford one.
What is the best choice—a Partial Disability Benefit Rider or a Total Disability one?
Since you might lose part of your ability to perform certain duties, it might be a good idea to add a partial disability benefit rider to your disability insurance. That way, you’ll receive a partial benefit in proportion to the income you lose if you can work part-time or take a lower-paying job during your recovery. As long as you have a policy that provides for your income in case your disability prevents you from working at all, it might be a good idea to add a little extra protection from a partial disability.
No matter what your budget, you need to find a way to protect your income in case you become disabled.
If you’d like to look over your options, we can help. Click on the ‘Learn More’ button below.
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This information is provided for general consumer educational purposes and is not intended to provide legal, tax or investment advice.
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