![]() Disability
DI insures one of your most valuable assets – your ability to earn an income. If you become sick or hurt and totally disabled, DI can provide income to help pay your living expenses such as mortgage, utilities, groceries, car payment, etc. and help maintain your standard of living.
If you rely on your ability to work and earn a paycheck, then you need DI. Think about it this way: What if the last paycheck you received was your last paycheck? How would you continue to meet your financial obligations if you became sick or hurt and totally disabled? Do you also have family members who rely on your income stream? How would you support them if you were suddenly unable to earn a paycheck? Acting now to protect your income is financially advantageous to you. The younger and healthier you are, the more likely you are to pay lower premiums and face fewer exclusions to your policy – such as limitations based on material health issues. If you wait to apply for DI and end up experiencing negative health changes, you may not qualify for a policy in the future. You probably insure your other assets like your house and your car. Can you afford not to insure one of your most valuable assets – your ability to earn an income?
DI provides an income to help pay your monthly expenses – such as mortgage, utilities, groceries, car payment – when you become totally disabled and cannot work. Health insurance typically pays costs associated with doctors, nurses, hospital stays and other medical expenses, but it does not pay you, and it does not cover your household expenses.
What are the types of disability insurance?
There are two types of disability policies: Short-Term Disability (STD) and Long-Term Disability (LTD):
- Short-Term Disability policies (STD) have a waiting period of 0 to 14 days with a maximum benefit period of no longer than two years.
- Long-Term Disability policies (LTD) have a waiting period of several weeks to several months with a maximum benefit period ranging from a few years to the rest of your life.
Disability policies have two different protection features that are important to understand.
- Non-cancelable means the policy cannot be canceled by the insurance company, except for nonpayment of premiums. This gives you the right to renew the policy every year without an increase in the premium or a reduction in benefits.
- Guaranteed renewable gives you the right to renew the policy with the same benefits and not have the policy canceled by the company. However, your insurer has the right to increase your premiums as long as it does so for all other policyholders in the same rating class as you.
In addition to the traditional disability policies, there are several options you should consider when purchasing a policy:
- Additional purchase options
Your insurance company gives you the right to buy additional insurance at a later time for an additional cost.
- Coordination of benefits
The amount of benefits you receive from your insurance company is dependent on other benefits you receive because of your disability. Your policy specifies a target amount you will receive from all the policies combined, so this policy will make up the difference not paid by other policies.
- Cost of living adjustment (COLA)
The COLA increases your disability benefits over time based on the increased cost of living measured by the Consumer Price Index. You will pay a higher premium if you select the COLA.
- Residual or partial disability rider
This provision allows you to return to work part-time, collect part of your salary and receive a partial disability payment if you are still partially disabled.
- Return of premium
This provision requires the insurance company to refund part of your premium if no claims are made for a specific period of time declared in the policy.
- Waiver of premium provision
This clause means that you do not have to pay premiums on the policy after you’re disabled for 90 days.
Everyone should protect their income and their savings against the risk and impact of a disability.
Your income is your most valuable asset and is the foundation to a solid financial plan. Help make sure you can maintain your lifestyle and protect your family's future if you become too sick or hurt to work.
Once you’ve protected your income, help ensure your dreams for retirement are not derailed by a disabling injury or illness.
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