Defining The Details Of Disability Insurance
Defining What is Disability Insurance
What is disability insurance? Disability insurance, often called DI or disability income protection, is a health insurance policy that insures the beneficiarys acquired income is maintained in the moment of a disability that stops him/her from working. There are two main kinds of disability insurance; short-term disability and long-term disability insurance.
Short-term disability benefits often start after two weeks in the case of sickness and promptly in the case of an accident preventing the insured person from working. Short-term disability insurance is most commonly offered by means of an employee group benefits plan. Personally owned disability insurance has a minimum waiting period of 30 days for sickness in Canada.
Long-term disability benefits often start 90-120 days after the onset of the disability. If the person is still not able to go back to work, and has exhausted their short-term disability benefit, they transition into long-term disability insurance in which the claim and condition is anticipated to last for a number of years.
The maximum monthly benefit an insured person can get on their disability insurance policy is often about 65% of your prior taxable acquired income. Unearned income, like rents and interest payments from investments, are not insurable. Also, high income earners have a less percentage of total earnings they are allowed to insure. This is to prevent over-insurance when people are on claim, causing lack of motivation to return to work.
How disabled do you have to be?
When making a claim for disability insurance benefits, a person can always qualify under the definition of total disability. This means that your doctor has said that, for reasons of illness or injury, you are unfit to go back to work in any capacity at the present time. All employee group benefits plans have this definition of disability.
There are two other definitions of disability which you can get on a personally owned disability product. Those are partial disability and residual disability.
Partial disability is defined as losing about 50% of your working income and/or being incapable to do one or more of the major duties of your job.
Residual disability is a simpler definition. If you are under a doctors care for an illness or injury and are losing income due to the disability, the insurance company will pay you the percentage benefit to align with) your percentage loss. {For instance, if you were working only two days a week and losing 60% of your prior income, you would receive 60% of your monthly disability benefit.
How long are disability benefits disbursed?
Another significant part of your disability insurance contract is the duration of time you could receive benefits. This duration of time could be as short as 24 months, or 5 years, or benefits until age 65. With a personal disability insurance plan you can choose the length of benefit you prefer. With most employee group insurance policies, you get 24 months of benefit (at own occupation definition see next section).
What Is Occupation?
And, you believed, disability insurance is not difficult enough, lets add another layer of complexity. Welcome to the definition of occupation. An insurance policy could have one of three occupational definitions.
Any Occupation the ability to work in any occupation for which you are adequately trained, educated and fit to work in. Cannot be working or earning money in any job to receive benefits.
Regular Occupation the ability to work in the industry and occupation you were in (at|during} the time of your disability insurance claim (i.e. if you cant work as a Mechanical Engineer you continue to receive benefits). Cannot be working or earning money in any job to receive benfits.
Own Occupation this has the same (definition|meaning} as Regular Occupation but enables the insured to work and earn money in a new job that is not related to their former industry (i.e. a doctor can no longer practice medicine but become a university professor).
Most employee group insurance has a 24 month Regular Occupation definition and then it shifts to Any Occupation. Lower cost personally owned disability policies also have this definition.
Riders to enhance your disability insurance policy
There are many valuable riders you can add to a personally owned disability policy. These riders could give you extra money for retirement savings, keep your monthly benefit indexed to inflation, allow you to instantly buy more insurance coverage as your income goes up, and more. If you are aiming a personally owned disability policy please have your insurance advisor notify you about such riders.
The cost of disability insurance
Disability insurance is one of the costly insurance products. Price is affected by the amount of insurance you are buying (the higher your income the more insurance you are able to buy), the quality of your product (Regular and Own occupation is more expensive than Any occupation), and specific riders you can add to the policy.
There are a couple of other factors that can impact the cost:
The kind of work you do. The higher risk jobs have higher premiums.
Your age like all insurance products, it gets more pricey as you get older.
Your gender women tend to pay more for disability insurance than men due to higher claim rates.
Your smoking status there is extra premium added up to a smoker policy vs. a non-smoker policy.
What is Disability Insurance Learn more from Life Guard Insurance
If you are interested in securing your income from an illness or injury causing you to be disabled then a disability insurance plan is right for you. Feel free to contact Life Guard Insurance to answer the question what is disability insurance for your unique career (situation|condition|case).
by: Mitch Reynolds
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