Disability Income Replacement InsuranceFewer than 20% of all working people have a personally owned disability income policy insuring their incomes against the threat of an unexpected accident or illness. Yet, insurance claim studies indicate that the odds of becoming disabled for 90 days or longer are much greater than dying during one's work years.
Note: Many contracts today
provide an own occupation-
--------definition providing for the payment of benefits
if the
-------- insured is unable to work in his or her specialty; e.g.,
-------- orthopedic
surgeon.
B. What about partial or residual disability? Are benefits provided when medical impairment allows the insured to perform only a portion of his or her duties? Is this benefit payable only when preceded by a period of total disability? The wording in the contract is very important.
C. Is a cost of living adjustment available to increase benefit payouts after a disability occurs and protect the insured against inflation?
D. Is the policy both non-cancellable and guaranteed renewable by the issuing company?
E. Is the waiting or elimination period proper for the insured's circumstances? Commonly available periods include 30-day, 60-day, 90-day, 6 months and 1 year. Naturally, the longer the elimination period one selects, the lower his or her premium payments will be. However, a person's needs, cash reserves and income sources should be the deciding factors in selecting a proper elimination/waiting period.
F. What benefit period should be selected? A long-term medical disability can be financially devastating. Therefore, one should elect a long-term benefit period where possible. Most companies offer coverage to age 65; some offer lifetime benefit periods.
Caution: Highly compensated employees should be aware
of
------------payment "caps" in many group longterm disability
------------policies. While some
programs will provide
------------disability income payments at 60% or 66% of
------------salary,
many have a relatively low dollar limitation,
------------such as $3,000 per month
.
A. Business Overhead Expense - Covers expenses such as staff salaries, rent, telephone, utilities, malpractice insurance and other expenses necessary to keep one's office open.
B. Key Person Disability - Reimburses the business for the loss of a key employee and allows funding of temporary replacement or training of a successor.
C. Disability Buyout - Provides income to fund a buy-sell agreement triggered by the disability of a shareholder-executive.