14. Disability income insurance provisions and costs

Selecting a Disability Income Insurance Plan

Youve decided to obtain disability income insurance and have done your homework to learn about the features of different plans.

Double-check your knowledge to help you select the plan thats right for you by answering the following questions.

You love your job and if you become disabled dont want to do any other job. Yet, youll need an income. Even though it will cost you more, you will buy a policy with a definition of disability of .

The cost is more because the insurer has flexibility when determining if youre eligible for benefits.

When you shopped for a disability income insurance plan, the likelihood of finding a plan that would pay 95% of your gross income was .

You found that the usual range of gross pay thats covered with disability income insurance is because the percentages could encourage some people to . In many cases, these people could then collect than their pay from their jobs. Limiting the amount of disability benefits to these percentages usually covers necessities adequately and often in their recoveries enough to return to work and thus return to their full income level.

How long should you receive benefits?

Upon retirement at 65, you expect to collect a pension, Social Security, and draw on your IRA. Your best friend works as a consultant, doesnt report income, and has a small IRA. You will most likely buy a disability income insurance policy that covers you . You suggest that your friend purchase a policy that provides coverage .

Your choice and suggestion are based on that fact that disability income insurance provides funds when income is lost due to illness or injury. If you become disabled after you retire you lose your pension, Social Security, or IRA income. If your friend becomes disabled, the small IRA is to be sufficient to provide for basic necessities. Additional income be necessary to pay the simplest expenses.

Disability policies include probationary and waiting periods.

You plan to take a vacation to go helicopter skiing and will be sure to purchase your disability income insurance policy before the trip. You should also make sure to take your vacation the policys period expires because if you get hurt during that time, you will .

Youve had a disability income insurance policy for many years. You have an emergency savings account that would support you for three months. If you lose income due to injury or illness, you plan to use these funds until the 90-day period expires, after which you begin receiving benefits from your disability income insurance policy.

Probationary and waiting periods are similar in that they help keep costs down, but they also differ.

Benefit paymentsboth current and futureare prohibited for injuries or illnesses that occur in the period. This period is usually . Benefit payments for injuries or illnesses that occur after the period made when the period has elapsed.

Noncancellation and waiver of premium clauses

A friend of yours has a great job that pays well. He plans to work all his life. His only source of income is his paycheck. He takes trips and enjoys other extras in life. Now that you know that becoming disabled can bring financial ruin, youll strongly recommend that your friend purchase disability income insurance. It is most important that your friends policy includes a clause.

You explain to your friend that a clause would relieve him of the responsibility of continuing to pay the insurance premiums when collecting benefits. But a clause means he would always have coverage. If the insurance company canceled his policy and he became disabled, hed lose a lot than he would if he collected benefits and had to continue to pay premiums.

The cost of premiums for men and women

The cost of premiums for disability income insurance with the same terms is for a woman than a man. A woman will pay approximately the same premium as a man her age for coverage with restrictions than the mans. The reason is that