Disability Insurance for Medical Market
.
Frequently Asked Questions
Request a quote for your insurance needs
It's been said that the disability policy is one of the most complex and difficult to understand of all insurance products. In order to help you gain a greater understanding of this type of protection we have published the following responses to questions we are commonly asked.
The following is a generic interpretation found in many disability contracts. If you are now insured, we recommend you refer to your policy for the exact language used.
- What is the Own-Occupation definition?
- What determines my disability?
- I've heard the term residual or partial benefits; what does this mean?
- I've been told I can only replace 42% of my monthly income in benefits. Why can't I insure a greater percent of my income?
- Which waiting period is right for me?
- Can a disability policy be purchased to insure my mortgage payment?
- How great is the risk of disability?
"What is the Own-Occupation definition?"
The Own-Occupation definition, otherwise known as "Own-Occ," is to a disability policy what your heart is to your body. It is the central most important definition when insuring occupations that require highly specialized personal services such as a surgeon who can no longer perform surgical procedures but can return to the field of medicine. Although he returns to work full time as a General Practitioner, he still may qualify for full disability benefits under the "Own-Occ." provision.
Insurance companies still make this provision available to many different occupations.
Does your policy contain such language?
"What determines my disability?"
Many companies define disability under the Own-Occupation Definition as follows: "because of injury or sickness:
you are unable to perform the substantial and material duties of your regular occupation and you are under the care of a physician appropriate for your injury or sickness."
"I've heard the term residual or partial benefits; what does this mean?"
Residual or partial benefits are terms that are often used interchangeably. Your policy will pay these benefits whenever your income is reduced 20% or more by a disability. In other words, if you were making $50,000 in annual earnings, were disabled, returned to work part time and now you're only making $25,000, this would represent 50% loss of earnings. You would then be eligible for a 50% Benefit.
Could you work in your occupation on a "part-time" basis?
"I've been told I can only replace 42% of my monthly income in benefits. Why can't I Insure a greater percent of my income?"
Insurance companies base the benefits available on what is termed an Issue and Participation Limit. Benefits normally fall in a range of 60-70% of income. These Limits prevent "over-insurance" as benefits received from individually purchased disability income policies are tax free, unless the employer pays all or part of the premium. Generally speaking, companies will issue benefits to a maximum "cap" of $15,000 per month. In cases of highly compensated applicants, this represents a low percentage of coverage. Our firm regularly places coverage in force for these individuals up to 75% of compensation with no monthly benefit limitation.
Are you under insured?
Which waiting period is right for me?
The waiting period is the number of days that must elapse between the time you become totally or partially disabled and the time benefit payments begin. Your plan offers a choice of a 30-, 60-, 90-, 180-, 365-, and 730-day elimination period. The 90-day elimination period is usually the most cost effective. In making the decisions about which one is right for your income protection, you should think about the type and amount of funds you have readily available to live on if you suddenly become (totally) disabled. How long will these funds last? Do you want to use some - or even all- of these funds for that purpose? Another consideration is the amount of premium you want to pay. The shorter the elimination period, the higher the premium. The 30-day elimination period is the easiest to satisfy. But to keep your premium costs lower, you may want a longer elimination period. What if you actually do become totally disabled? Think about it. It's better to have coverage even if you have to wait a little longer to receive benefit payments than not to have any at all because you don't think you can afford it.
Can a disability policy be purchased to insure my mortgage payment?
Yes. According to the United States Saving and Loan Association, less than 3 percent of all mortgage defaults occur because the bread-winner dies with inadequate life insurance. Nearly half (48 percent) however occur because the bread-winner becomes disabled and has inadequate disability income insurance.
Would your home be subject to foreclosure if you become sick or hurt?
How great is the risk of disability?
For comparison, about one person in 105 dies every year. One home in 88 catches fire. One car in 70 has an accident. One person in eight will suffer disability.