Considering Disability Insurance? Here is Some Food For Thought - These Morsels Could Save You Cash!

Don't be caught without a form of income, make sure you get paid! If you get injured, be prepared!

Some things to consider when determining disability income needs are

- Establish the absolute minimum required if income stops.
- Determine your retirement needs if work ceases and the ability to pay into your retirement ends.
- Allow for any benefit that might be offset by social security
- and workers compensation.

Some thought needs to be afforded to the possibility of "total disability." Watch out here too... Definition are important! Policies and different companies may use different definitions for "total disability."

Some policies will NOT cover you if you get injured doing something that they deem "to dangerous" (i.e. skydiving or race car driving). Also, some interpretation is important as far as to the insured's own occupation and any occupation the insured may be qualified to perform.

There are three methods used to determine "total disability", these are

1. Predefined Occupational Method (Based on Insured's Own Occupation)
2. Reasonably Qualified Occupational Method (Based on Insured's Experience, Education and/or Training)
3. Presumptive Disability (Loss of limbs, sight etc...)

Pre-Defined Occupational Method - This method concerns the occupation that the insured is normally engaged in. In this case total disability might be defined as "the insured's inability to perform any or all of the duties or his or her own occupation." This is determined by the insured's occupation at the time that disability begins.

Reasonably Qualified Occupational Method - This method is more limiting defined as "the insured's inability to perform the duties of any occupation for which he or she is reasonably qualified by education, training or experience."

In other words, while you may no longer be able to conduct the tasks of your current occupation you may be able to perform activities in the associated field.

There are some disability income policies that use another criterion to classify total disability. This is called presumptive disability and automatically qualifies the insured for total disability classification.

These conditions are:

• Loss of use of any two limbs
• Total and permanent blindness
• Loss of speech and hearing

Presumptive Disability - This method sometimes involves a loss of income test. If the earnings after disability significantly drop below pre-disability earnings by a given percentage the insured may be considered totally disabled.

As a rule of thumb, a short-term policies cover non-occupational disability. On the the hand, long-term policies cover both occupational and non-occupational sickness and accidents. At this point if the worst does happen, and you are totally disabled, occupational benefits are routinely reduced because you may qualify for benefits form workers compensation and social security.

Other considerations are the provisional period, elimination period and the benefit period. Some disability policies use a probationary period that begins when a policy goes into effect and no benefits are paid during this period. It varies but is often 15 or 30 days and sometimes up to 60 days for long-term policies.

In addition to the probationary period some policies also include an elimination period. It begins when the policy goes into effect and can last for any length of time even up to a full year. This is usually left to the insured to decide as it is based on how long the insured can go without income after becoming disabled.

The primary advantage to a long probationary period is a low premium and allows the insured to use premium dollars to purchase a benefit that best suits their needs.

The benefit period, which is the length of time, can vary depending on the needs of the insured. They can be as short-term as 13 weeks up to long-term as long as age 65.

As a general rule the longer the benefit period, the higher the premium. Same as everything in life, we get what we pay for. Benefit amounts for both short-term and long-term policies range from 50% to 66 2/3% of earnings with a cap on the maximum amount to be paid.

Other disability categories are confining vs. non-confining, partial, residual, recurrent, delayed, combined accident and sickness and non-disabling.

We won't cover definitions of each category here, but do be aware of their existence and check your policy for a definition of coverage for these types of disability.

Most companies offer optional short-term benefits for an additional cost. A typical disability income policy might include all, some or none of the items below so it is important to discuss these with your agent.

These options are:

• Supplemental income - sometimes called an additional monthly benefit rider, provides additional income during the first several months of a long-term disability.

• Hospital income - pays a stipulated amount per day when hospitalized extending for a certain period and can be up to 12 months.

• Elective benefits or indemnities - provides lump-sum payments for certain injuries like fractures, dislocations, sprains or amputations of toes or fingers and is elected by the insured in lieu of weekly or monthly benefits stated in a contract.