These are the most frequently asked questions we get asked about disability insurance. If you don’t find an answer to your question here, check out our Disability Insurance Education Center or Contact Us with your questions. Also feel free to call us at 866-868-0099 ext. 105 and ask for a disability insurance specialist.
Who needs disability insurance?
If you are dependent on your income and it would cease or decline if you were to become disabled, you are a good candidate for disability insurance.
When should I purchase disability insurance?
As soon as you can. There are several reasons not to “put it off until later.” The most obvious reason is the cost of coverage will increase as you get older. If you are earning an income, you need to protect it now. Also, if you are currently in good health, you should have no difficulty qualifying for a policy. However, if your health declines or if you experience a disability, you may no longer be insurable (if you are still insurable, it will certainly be at a higher premium).
Is Disability Insurance different from Workers’ Comp?
Yes. The difference is that workers’ comp is only available if you are injured on the work site, performing duties associated with your job. Your employer pays into workers’ compensation insurance, much like how they pay sick leave or pay into unemployment insurance. However, most workers’ comp doesn’t cover the full amount of a lost paycheck.
Disability insurance, on the other hand, covers injury and illness incurred in or out of the workplace, and it offers much more customization and flexibility than workers’ comp.
What Type of Injuries and Illnesses does Disability Insurance Cover?
Disability insurance covers anything that prevents you from doing the regular duties associated with your occupation. This includes both long-term and short-term disability and illness.
Some examples that would prevent you from performing your job include:
- Cancer
- Heart attack, coronary artery disease, stroke
- Chronic back pain
- Osteoarthritis
- Disabling injury
- Mental disorder
- Complications due to childbirth
How much will coverage cost?
The cost of disability varies depending on many factors, but paying 1% – 3% of your annual income is the generally accepted estimate. For example, if you earn $100,000 per year, you can expect to spend between $1000 and $3,000 per year depending on age, occupation, and the level of benefits.
Age and occupation are important factors in determining the cost. Older people have higher premiums—which is a good reason to get locked into a rate while you’re young. If your occupation puts you at more risk for injury (e.g. construction worker), your premiums will also be more expensive.
You should expect to pay between 1-4 percent of your annual income. These percentages are a rough estimate, based on selection of certain benefits and options. Our representatives will assist you in purchasing the coverage that fits both your needs and your budget.
How much benefit should I have?
You should have enough coverage to maintain your current lifestyle until you are able to return to work, factoring in all other sources of income (group disability policy, investments, etc.).
Most insurance companies will cover up to 50-60% of your income. All companies have a maximum amount they will cover.
What options should I choose?
Each company will offer different riders, but most have the following options we typically recommend:
- Residual disability provision: Under a residual disability provision (either in the policy or available by rider), an insured receives a percentage of his or her disability benefit based on the percentage of income loss the sickness or injury has caused.
- Inflation protection: Individual disability income policies generally offer a cost of living rider that will adjust benefits for inflation during a long-term claim.
- Future increase option: As long as your increased income qualifies for more coverage under the company’s issue limits, the future increase option guarantees your right to purchase additional coverage up to a stated age without evidence of
insurability.
How do I determine the correct Elimination Period?
Individual disability insurance policies contain an elimination or “waiting period” during which no benefits are payable. Generally, you have a choice of waiting periods ranging from 30 days to one year. The longer the waiting period, the lower the cost of the plan. You should determine how long you can be without an income, based on your savings and other sources of income.
How do I compare policies from different companies?
It’s very difficult to “compare apples to apples” when comparing policies from different companies. Read the policy language and definitions carefully, as they vary greatly from company to company (e.g., what is the definition of Own Occupation; how do they value Residual Disability?; etc.). At LifeInsure.com, one of our representatives will assist you in selecting a policy from a company that offers the appropriate coverage for your situation.
If I have a group disability insurance policy, do I also need an individual disability insurance policy?
If you have a group policy, you might still consider purchasing an individual disability insurance policy for several reasons: If you terminate employment, you probably won’t be able to take the policy with you; the benefits in group disability policies are limited; most group plan benefits are taxable because the employer pays the premiums; because of benefit caps, highly-compensated individuals are often under-insured. Also, group insurance policies usually “integrate”; i.e., they are lowered by other benefits you may receive such as social security disability or state disability plans.
Should I purchase disability insurance through my association?
You should definitely look at coverage through your association. However, you should compare the coverage offered by your association with individually owned policies offered by other reputable disability insurance carriers. Then, select the policy that offers the best coverage for your situation. At LifeInsure.com we can help you compare association coverage with individual policies so you can choose intelligently.
The Application Process
Why do I have to provide proof of income?
Just as financial institutions require income verification for mortgages, loans, etc., income verification in the form of tax returns, W2’s and/or pay stubs is needed for disability insurance. After all, the insurance company is accepting a potentially large financial risk.
Will all my information be kept confidential?
Just as financial institutions require income verification for mortgages, loans, etc., income verification in the form of tax returns, W2’s and/or pay stubs is needed for disability insurance. After all, the insurance company is accepting a potentially large financial risk.
Will I need to take a medical exam?
In most cases, blood and urine samples are required. Depending on your health history, your age and the amount of insurance applied for, you may also be required to take a medical exam
If tests or exams are required, who will pay for them?
The insurance company you are applying with will pay the entire cost and arrange for any tests to be done (although we might arrange them on their behalf).
What if I have a health problem?
In some cases, coverage may still be issued. However, the coverage may be modified or a particular condition excluded from coverage, or an extra premium may be charged because of adverse health history.
If I am issued a modified policy, can it be reviewed later?
In some instances, yes, depending on your health history. Regardless of any exclusions, we recommend having coverage for any other potential disabilities.
How long will it be before I receive a decision on my application?
In some instances, yes, depending on your health history. Regardless of any exclusions, we recommend having coverage for any other potential disabilities.
When does my disability coverage begin?
Your coverage will begin after the company approves your coverage and when the insurance company receives your signed documents along with the first premium payment (upon completion of underwriting).
What to Expect During the Disability Insurance Claim Process
Since 1 out of every 4 Americans will suffer some sort of disability before reaching retirement age, many people are beginning to see disability insurance is an absolute necessity. Should you become ill or injured and unable to work, a good disability policy will protect you and your family from further tragedy by providing you with a financial safety net. But, having a policy and actually receiving benefits are two different things, and filing a disability insurance claim can sometimes be a long and complicated process. The terms of your policy, the nature of your injury or illness, and whether your policy is a group or individual plan can all effect how long and complex your claims process will be. So although the process varies on a case by case basis, here’s what you can generally expect when filing a disability insurance claim:
How Much will a Disability Policy Pay Me in the event of a Claim?
Long-term disability insurance pays out a percentage of your earned income. Depending on your policy, this amount typically ranges from 50% to 66% of your monthly earnings.
Some policies include a cost of living adjustment, which will increase the amount 1%-6% each year to keep up with inflation.
Filing a Claim
If you become disabled due to an illness or an injury that prevents you from working, the very first step is to file a claim with your insurance provider. This is pretty straightforward and generally involves filling out a form describing your job responsibilities and the injuries that will prevent you from performing them. You’ll also need to get a statement from your doctor verifying your injury and inability to work, and outlining a treatment plan.
Denial of a Claim
There are a few possible reasons why your insurance company might decide to deny your claim. If your particular injury or illness is expressly excluded from your policy or if the insurance company has any reason to doubt your doctor’s prognosis, there’s a chance your provider will withhold your disability benefits. What happens next depends on the type policy you have, but if your claim does happen to be denied, it doesn’t necessarily mean you won’t receive your disability benefits. In most cases you can appeal a denied claim, which will take some time, but if you can prove that your claim is legitimate, you shouldn’t have a problem winning your appeal and getting your benefits within a few months.
Elimination Period
Most disability insurance plans also stipulate a waiting period known as the “elimination period” between the time of your injury and the dispersal of benefits. The length of the elimination period depends on your plan. They can range anywhere from 30 days to one year, and the shorter the waiting period is, the more expensive your plan will be.
Exactly how long a disability claim takes depends on the particular policy and the individual circumstances surrounding the claim. It could be right away, it could be months. So, no matter what sort of plan you have, make sure you know the details of your agreement. Talk to an insurance provider and read up on your policy’s terms so you can be certain that your coverage will be there if and when you need it.