THE FALLS INSURANCE CENTER, INC.
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Becoming disabled through an injury or sickness can mean a significant loss of income. Disability insurance is a form of health insurance that provides a person who becomes disabled with income to cover living expenses that continue in spite of the disability.
Disability insurance provides you with an income should you become sick or injured and unable to work. It helps protect against family financial catastrophe by giving you an income to meet daily expenses.
To determine if you have enough income protection and to evaluate your specific needs, you should contact us.
Income replacement insurance is particularly important if you own a small business. In addition to standard disability policies, some polices have such special features as:
Many people who thoughtfully protect their families against the loss of income from a breadwinner's death fail to think about what would happen if that person did not die but was unable to earn a living because of a disability. In fact, long-term disability may worsen a family's financial situation more than a wage earner's death because although income stops, expenses continue.
What is disability insurance?
Disability insurance comes in two major forms:
How can I determine if I have enough protection?
First, find out exactly what benefits your employer offers in the event of a
disabling illness or injury. Most employers allow some short-term sick leave,
which might last from a few days to as much as six months, depending both on
employer policy and on duration of employment. Typical group long-term
disability benefits replace about 60 percent of salary, start when short-term
benefits are exhausted, and continue anywhere from five years to life. Often,
group long-term insurance is fully paid for by employers without contributions
by employees. (That's why employer-paid disability income benefits are subject
to income tax.)
Check with your employer's benefits office to see if you are covered and, if so, what is available to you. Find out how long you must wait before benefits begin and how long payments will continue during your disability. Find out, too, whether your employer's plan takes other disability coverage (such as government programs) into account when calculating your long-term disability pay. Ask for a booklet describing the disability coverage your company offers.
To determine whether you need a private disability policy over and above any other income protection you might have, add up all the benefits you are entitled to under employer benefits, government benefits, and other programs mentioned in this section, along with the monthly income you could count on from other sources such as income from your savings. If the total approaches your required income after taxes, you can assume that, should total disability strike, you would be able to pay your day-to-day bills while recuperating. If the total from employer benefits, government benefits, and other programs, along with your own resources, will not be close to your pre-disability, after-tax income and will not be adequate to support your family, you will want to consider buying additional disability insurance to make up the difference. To help you determine if you need an individual disability income policy, please call us.
If you are your own employer, consider a group policy for yourself and your employees. If you are a sole practitioner, or if you work for a business that does not provide benefits under a group policy, an individual policy is a good idea. After all, if you do not receive benefits, your entire business may suffer. It is important to compare the policy provisions of the group plans with private individual plans to determine that which is best for your needs.
What features should I think about when deciding on what disability policy is right for me?
Policies vary. Some pay benefits if you are unable to perform the duties of your customary occupation, others only if you can engage in no gainful employment at all. Be sure to ask your insurance agent how various policies define disability.
Some older policies require that you be totally disabled before payments begin. Partial disability sometimes is covered for a limited time but most often only if the partial disability follows a period of total disability for the same cause. Some policies may not require total disability before partial disability payment.
If you are able to work but your income is reduced because you cannot fulfill all of your job responsibilities, residual benefits can help to make up the difference in your income. A standard feature in some policies (added with a rider to others), a residual benefit allows partial payment based on your loss of income without prior total disability.
Even if you can still perform some or all of your regular job, you are presumed fully disabled and are entitled to full benefits under specified conditions. Those conditions typically include loss of sight, speech, hearing, or use of limbs.
Monthly benefits are calculated in terms of stable, earned income at the time of purchase. Most insurers, not wanting to provide benefits so sizable that they would encourage workers to remain at home, limit benefits from all sources to no more than 70 to 80 percent of monthly income. Lower-paid workers can expect to receive a greater percentage of their pre-disability incomes while higher-paid workers generally receive a lesser percentage.
Some policies offer the opportunity to buy additional disability coverage to keep pace with a rising income, without having to pass a medical examination or submit further medical evidence of insurability.
When will the payments begin?
Policies today allow you to decide when benefit payments begin. You can choose
a waiting period at the time of application; these range anywhere from first
day to six months or more after the onset of the disability. Depending on how
much money you have saved, and your other resources, you can reduce your
premiums by electing to wait 60 days, 90 days, six months, or even 12 months
before you start to receive benefit payments. Remember, though, that the first
check is usually not paid until 30 days after the waiting period.
What is the length of coverage?
By choosing a benefit term, you will elect benefits that are payable for three
months, six months, one year, two years, five years, to age 65, or for a
lifetime. Electing shorter benefit periods can save premium dollars, but bear in
mind that if you need this insurance at all, you probably need it most to cover
a disability that permanently removes you from the work force. A lengthy
disability threatens your financial security much more than a short-term
disability.
How can I keep pace with inflation?
For an additional premium, you can add a cost-of-living adjustment (COLA) to
basic disability income coverage. This provision increases benefit payouts by a
specified percentage, generally 3 to 8 percent, after each year of disability
and can be important particularly during a lengthy period of total disability.
While this is a relatively expensive option, it could be vital to maintaining
your standard of living.
Can I get premium waivers if I am disabled?
Most policies include a waiver of premium provision, so that you don't have
to pay any more premiums after you're disabled for a specified waiting
period.
What would happen to my small business if I were disabled?
Income replacement insurance is particularly important if you own a small
business. In addition to standard disability policies, some polices have such
special features as: