Disability Insurance

The following are key points to focus on when looking for a disability income insurance policy:

1. Own Occupation Definition of Disability for Income Protection:
There are two very different definitions of disability used in
disability policies.

The first definition defines a disability as a condition that prevents you from performing the major duties of your occupation.

One top-rated disability insurance company summarizes their definition of disability as:

“Pays benefits if you are unable to perform the material and substantial duties of your own occupation due to sickness or injury…even if you are able to do
some other kind of work.”.

The other, and less favorable, definition of disability states that you are disabled if you can’t work at any gainful occupation.

This kind of policy may also have a residual benefit that says if your income goes down the insurance company will pay a partial benefit. One of the most important features for a professional or executive is the own-occupation definition.


2. A policy with the right definition of residual (partial) benefits and
return to work benefits:

What does that mean?

The following example may help: A physician is disabled, then recovers and returns to work after three years of disability.

There is not much of a practice left and there is no cash flow but there are some patients starting to come back. There are personal and business expenses to fund. Over the next six months the business picks up but there is still low cash flow.

After one year the cash flow returns to 60%. During all this time the physician is working full time. Let’s see how this claim could be handled by two different insurance companies.

Company A says that if you’re back at work full time after three months no matter your income that since you are at work full time you will no longer receive benefits. (Time and duties method).

Company B says: you’re not back to full cash flow and pays the proportionate amount of your loss. Both of these companies might have “own occupation” definitions for total disability but one is much less favorable for you after recovery.
(Income definition of recovery and residual benefit.)

There are important differences to consider. We recommend that you get an occupation definition of disability and an income definition of recovery and residual.

3. Financial Strength of the Insurance Company:

This could have been listed as the first point since the stability and financial strength of the insurance company are primary factors to consider.

Without the company there to pay the claim, it doesn’t matter what the definitions are. You will be staking your future financial cash flow on this insurance company if you’re disabled. We will review financial strength ratings of the companies we discuss
with you, including ratings from the independent rating services: Standard & Poor’s, Moody’s, A.M. Best, Fitch and Weiss.

There’s no way to predict who will become disabled during their 40 or so working years. Without an income, most people’s savings are rapidly depleted as they struggle to maintain the household and meet expenses. Many begin to suffer real financial need, often with no end in sight as the disability lingers on.

Disability Statistics

According to a recent study, most people estimate they have only a 16% chance of becoming disabled during their working years1 – in spite of the following startling facts2:

  • If you’re under age 35, chances are one in three that you will be disabled for at least six months during the course of your career.
  • Men have a 43% chance of becoming seriously disabled during their working years.
  • Women have a 54% chance.
  • At age 42, it is four times more likely that you will become seriously disabled than that you will die during your working years.

Sources:
1. Gallup survey, conducted for UNUM Corporation (508 respondents, aged 30 to 65), reported by Best’s Review.
2. “Why Disability” booklet, published by National Underwriter.

from : www.protectyourincome.com

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