What is disability insurance?
Disability income insurance provides your clients with income should they become sick or injured and unable to work. It helps protect against family financial catastrophe by giving them an income to meet daily expenses for as long as the disability may last or the length of the policy benefit’s coverage. By definition disability insurance pays benefits in the event that a policyholder becomes incapable of working due to a covered sickness or injury.
Key Disability Terms:
- Benefit level and period: Disability policies usually pay up to 40% to two-thirds of your clients pre-disability earnings at the time of purchase for a specific period of time specified in the policy (1-5 years or to age 65 – retirement).
- Elimination-waiting period: There is usually a waiting period, known as an elimination period, which is the time an insured covers the cost of disability before benefits kick in. Waiting periods can be from as short as 30 days to as long as two years. The longer the waiting (elimination) period the less expensive the premiums.
- Extent of disability: Some policies pay only if your client is totally disabled. Others cover partial disability for a limited time, but only when it follows a period of total disability for the same cause.
- Guaranteed renewable: One of two major types of disability policies. It means the policy can’t be cancelled as long as the premiums are paid. Premiums can be raised for an entire class of policyholders but not for reasons related to any individual client’s circumstances.
- Non-cancelable: These policies can never be cancelled as long as premiums are paid, and premiums are guaranteed not to increase.
- Inflation protection: Clients can add cost of living adjustments to a policy that increases by a specific percentage on an annual basis and continue to increase even after each year of disability. Though expensive, this option can be vital to maintaining your clients’ standard of living if they are out of work for long periods of time.
- Presumptive disability: Even if your client can still perform some or all of their regular job responsibilities, your client is presumed disabled and entitled to full benefits under specific conditions such as loss of sight, speech, hearing or use of limbs.
- Residual benefits: If your client is unable to perform some aspects of their job, residual benefits allow partial disability payments based on their loss of income.
- Wavier of premium: Eliminates premiums after your client has been disabled for 90 days. No future premiums will be due until your client returns to work and is no longer receiving disability payments.
- Tax-free benefits: As long as your client pays for their individual disability insurance with after tax dollars their benefits will be received tax free.
90% of disabilities are illness related, whereas only about 10% are due to injury. Understand that most long term disabilities are not covered by worker’s compensation insurance (on-the-job injury coverage).
Three ways to get disability coverage:
- Individually purchased policies
- Employer purchased (group or individual)
- Through a professional organization (if available)
For a personalized solution for your client's needs call 866.452.3670 or email us at sales@pipaclife.com .
