Disability Insurance Explained

The most valuable asset most people have is their ability to earn an income.  That is the source of all their other wealth such as homes, cars, retirement plans and other assets.  If they lose their ability to earn an income, they can still protect their future with Disability Insurance.  Your income is the Goose that lays the golden eggs and needs to be protected above everything else.

Disabilities can happen in a moment’s notice. In fact the statistics may surprise you:

1 in 3 people will be disabled for a minimum of 90 days before the age of 65. The average length of a disability that extends past 90 days is 2.9 years.

So for most people, their income is not only their most important asset, it is also their most vulnerable asset.

A long term disability is often referred to as a “living death.”  That is because if a breadwinner dies, at least she or he is no longer an expense to the family, but with a disability that person is still there as an ongoing expense.

To bridge the gap between the financial loss and growing expenses incurred during a time of disability one can purchase personal or business disability insurance. This article will focus on personal disability insurance.

Personal Disability Insurance

Personal disability insurance policies are designed to give the insured monthly compensation while disabled.  Depending on the plan they can be payed for total, partial and residual disabilities.  This will give the disabled person a significant reliable income to use to continue to fulfill their responsibilities and aspirations.

Most disability policies once issued cannot be modified or terminated, and the premium cannot be adjusted until you reach the age of 65. At this point your policy may be modified and can be renewed annually as long as you maintain full-time employment. The only thing that would let the insurance company out of its commitments (other than fraud or misrepresentation on the application) is if you fail to pay your premiums in a timely manner.

Disability plans come with many standard and optional benefits.  Some of the usual standard options are:

Presumptive Disability

One of the benefits that may come  with your disability insurance policy is presumptive coverage. This coverage comes into play if your injury or illness results in a complete, irreversible loss of—your speech, full hearing, full sight, use of one or both hands, or use of one or both feet.

If you experience a presumptive disability your waiting period will be waived and your policy will kick in—even if you are still able to work.

Catastrophic Disability (occupational restrictions may apply)

Catastrophic disability benefit is defined by “Loss of Independent Existence” which requires you to rely on someone else for your ADLs (Activities of Daily Living).

Survivorship

If you are receiving disability benefits when you die, a lump sum will be paid to your estate totaling 3x your monthly disability benefit.

Rehabilitation

You may also qualify for pre-approved vocational rehab while you are receiving your disability benefits.

Recurrent Disability

If your disability or a related disability returns within the designated time frame your monthly disability benefit will resume without the standard waiting period.

Recovery Benefit

When you return to work full-time, in the same occupation you were employed in when you became disabled, you may qualify for several months worth of recovery benefits so you can rebuild your practice or business.

Transplant Surgery

If your disability is the result of a surgical procedure in which you are a living donor offering a transplant to someone else you may be eligible for disability coverage. However your disability policy will have to have been in place for at least 6 months prior to you becoming a living donor.

Waiver of Premium

If you become disabled for a full 90 days, the insurance company will waive your premium while you recover.  They may also refund your premium for the prior 90 days.

The above benefits will vary from policy to policy and company to company.   There are also optional benefits available which can be very important to you and should be discussed.  These options include Cost of Living adjustments, the right and option to buy more insurance in the future without having to prove your good health, and  protection in your specific occupation.

As disability policies are fairly complex, you should discuss your situation with an insurance broker who is experienced in this area.   If you would like to discuss your situation please click on the Contact Us section to send a request.

By Myles Rempel

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