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Archive for the ‘Disability Insurance’ Category

Short-term disability insurance (also known as STD) is a branch of general disability insurance policies. This type of insurance covers potential disabilities only for a short period of time. That is, if you happen to be unable to work for a limited period, the insurance will cover a percentage of your salary; this continues until you are again able to work or until the deadline of the coverage expires.

Specifically, short-term disability policies are designed for people who do not have the financial background that would enable them to make it through a temporary disability situation. This means that those policies are only designed to cover a period of time that lasts no longer than one year. A typical example is a woman who is about to give birth. She is going to be unable to attend her job for at least three months. If she were not financially strong enough to handle a loss of salary, then short-term disability insurance would definitely help her.

Disability policies will cover injuries caused by accidents as well as illnesses that prevent you from being able to work. Again, the coverage will only be valid for a pre-specified, short period of time; as soon as that period of time is over, your short-term disability policy is no longer obliged to support you.

As a side note, this type of policies never supports you with your full salary; they will only provide you with a percentage of your original salary. Percentages usually range from 45% to 60%, and they never go above 70%. This is a factor that someone who seeks such a policy should consider very well before he chooses.

One important thing to know is that when you claim temporary disability, depending on the reason that you present, the payment may come earlier or later. Although first payments usually come after two weeks, injury disabilities are paid almost immediately. On the other hand, it takes a few days in order to prove that an illness is really preventing you from being able to work.

The escalating rate of workplace disabilities is causing businesses and consumers alike to revisit how they handle stress and health issues. High stress, lack of exercise and other factors exacerbated by an aging U.S. workforce are contributing to an increase in the numbers of individuals receiving long-term disability payments each year, according to a new study from the Council for Disability Awareness.

This issue worries more than just older workers. The U.S. Social Security Administration projects that nearly a third of workers under 21 will become disabled before they reach their late 60s. Women, especially, are at risk at a time when disability claims filed by women is reaching levels almost twice the rate of men.

Especially unnerving is the fact that only 36 % of all employees are covered by long-term disability insurance. Clearly, preventive steps are in order to protect workers, the self-employed and businesses alike.

Today’s high stress workplace, in which the traditional 40-hour work week is giving way to 50- and 60-hour weeks, has been linked by more than a dozen studies in recent years to increasing rates of depression, high blood pressure and obesity from lack of exercise ‘ all mental and physical health issues that can lead to long-term disease and disability.

4 Smart Ways Businesses Can Stave Off Climbing Disability Rates

1. Revisit long-term disability insurance coverage to stave off the later, higher costs of employee replacement.

2. Promote stress-reducing policies such as implementing mandated breaks every two hours and regularly scheduled wellness campaigns that focus on stress-reducing help from outside professionals.

3. Give attentive caring to ergonomic factors like lights, and seat and desks.

4. Encourage your staff to take part in activities that reduce stress. Feeling powerless on the job is a rising factor in the high price tag of lost productivity and rising employee turnover rates blamed on workplace stress.

4 Smart Ways Professionals & Employees Can Avoid Becoming Another Statistic

1. You can raise the state of your health as a main-stay of your career. How healthy you are will prove of greater importance to your earnings and how long you can work. Exercise and eat healthy to avoid the long-term damage to your career from obesity, high blood pressure, heart disease, depression, diabetes and other disabling diseases.

2. Combat stress at work and at home. What stressful situations can you avoid, change or better accommodate? Try turning off your cell phone and your computer several times a day. Take frequent exercise and mental breaks.

3. Take back control of your days. Write your plans down. That form of commitment will help you exercise, work on stressful components and be healthier every moment of each day. Lack of control is a major contributor to stress. You can commit to keeping track of and being responsive to daily stress.

4. Consider purchasing long-term disability insurance on your own. The advantage of this is that, in an era where changing jobs often has become the norm, you can take your protection against long-term disability from job to job. The insurance council has established a new Web site at http://www.disabilitycanhappen.org with good information on this subject.

With more aging workers, and more workers expected to work well into their 60s and 70s in today’s economy, long-term disability rates will continue to climb. Self-employed professionals, business owners and employees can take smart steps now to avoid stress and adding to these rising statistics.

Non-Cancellable & Guaranteed Renewable

This is the most comprehensive level of renewability possible for a consumer. Most of the major individual DI carriers do offer a policy that is “Non-Can”. There is a big difference between a Non-Can policy and a policy that is just Guaranteed Renewable, so make sure you understand which renewability feature your policy has before you make a decision.

A Non-Cancellable disability insurance policy means the premium schedule will never change. If you have a policy with a level premium payment schedule, the price you pay for your policy today will be the same 30 years from now. The first major benefit of a Non-Can policy is the premiums will never change unless you buy more coverage in the future. The benefit amount and benefit provisions will also never change under a non-cancellable and guaranteed renewable disability insurance policy.

Guaranteed Renewable

A “GR” policy does not offer your premiums the security level you think. The insurance company can raise rates on a GA policy by state, occupational class, or policy year. Carriers have increased rates in the past with GR disability insurance policies, and odds are it will happen again. A GR policy is going to be about 20% less expensive than a DI policy that is Non-Can, however to know that there is no way an insurance carrier can raise me out of my policy is well worth the guarantees. Think about the possibility of being 57 years old and getting a 100% rate increase because the company you bought a policy from has really bad experience in your home state, or occupation. Most people purchase individual disability insurance to protect their family and their income, a guaranteed renewable only policy may be a bit cheaper, but you run a risk of seeing a big rate increase at the worst time with one.

Conditionally Renewable

You will usually only see this with association disability insurance policies. There is no guarantee the rates will remain the same, and they can be raised as much as the insurance company wants anytime. Many of the major medical and dental association plans are conditionally renewable, and have all had several rate increases during the past twenty years.

Most people who have disability insurance got it because their employer got it for them. But the truth of the matter is that you need to look out for your own welfare. The group disability insurance is not always adequate for your needs hence the consideration for individual coverage.

You can get your policy through a financial planner or your mortgage company or still, the agent who sold you your other policies. The premium for individual coverage is estimated to be about five to ten times more than the cost for group coverage.

Usually there are policies that you can get for two years, five years or until you retire. You can decide to purchase a Cost of Living Adjustment (COLA) this feature allows your benefit to be raised with inflation and gradual salary increase. It adds a percentage to your coverage each year.

To get individual disability policy, you need to take a medical exam to determine your insurability.
Most policies are on a non-cancellable basis or guaranteed renewable basis.

The non-cancellable basis means that after you have taken the medical exams and have signed the dotted lines with your insurer, they cannot cancel the coverage or increase your premiums.

The renewable guaranteed basis means that your insurer cannot cancel the coverage but they can increase the rates. This cannot be done on an individual basis though but can only raise the rates for the whole group of insured person if they have experience high number of claims.

Your individual disability benefits would pay you a fixed amount every month and most times they would not pay more than 80% of your current salary. The determining factors for your premium and whether the insurance company would cover you include; your occupation, your income and other sources of insurance. When they have decided on the rates that you should pay, they’ll then put you in a rating class with people of the same age, income, occupation and health condition.

Although disability insurance can be very expensive when you buy it personally, it is a very wise financial decision.

There are two types of Disability insurance a person can have: Long-Term disability and Short-Term disability. Depending on your work situation, you may be eligible for both types of coverage through your employer in the form of a group plan. For those who are not provided these benefits at work, you are able to obtain both Short and Long-Term coverage directly through an insurance company on an individual basis.

Individual Disability insurance must be applied for. The application process is fairly uniform amongst the various insurance companies and will traditionally require the applicant to complete a paper/electronic application, an insurance medical exam, a phone interview and provide tax returns as proof of income. Without getting too far into the details of this process, you can expect that obtaining a policy will take anywhere from 3-8 weeks on average.

The big dilemma that many people will face is whether to obtain Short-Term or Long-Term disability. Solely based on the potential loss of a Long-Term claim vs. a Short-Term claim, it certainly makes more sense to have Long-Term protection, but it is often not that simple. In order to clarify this issue, consider what each is truly protecting.

Traditionally, a Short-Term disability policy will be designed with a 7-14 day waiting period and 3-6 month benefit period. This means that benefits will become payable after 7-14 days of being disabled, and will continue to be paid for up to 3-6 months for any one illness or injury. In most situations, Short-Term coverage is intended to pay benefits during the waiting period of a Long-Term disability policy, but terminate once the Long-Term benefits become payable. It can be described as an insurance that provides you with sick leave. Being that Short-Term disability insurance pays for relatively short benefit periods, it is protection against a simple type of injury or sickness, but not something major.

A Long-Term disability policy will usually be designed to begin paying benefits after 90-days of being disabled and will continue paying benefits for 5-years, 10-years or until retirement age, depending on which benefit period you choose. Long-Term disability is the type of coverage that can truly save a person from facing a complete financial disaster. We live our lives expecting and assuming that our ability to work and earn an income will never cease. Without that ability to continue earning an income however, we are no longer able to support our lifestyles and financial responsibilities.

To clarify: assume a person has $5,000 of monthly benefit on his/her Short-Term and Long-Term disability policy. If this person incurs a Short-Term claim of 5 months, assuming a 14-day waiting period, he/she will be eligible for a total of $22,500 over the 5-month claim. Although this is a substantial amount of money and not having it can certainly create financial hardship, this is probably not sufficient to cause a bankruptcy or foreclosure. If this person incurs a longer claim of 4-years, the total benefit paid would be $240,000. Clearly, with Long-Term disability insurance you are protecting a much larger risk. A loss of $240,000 is much more likely to cause bankruptcies, foreclosures and a severe financial disaster than a loss of $22,500.

Both Short-Term and Long-Term disability policies can be custom designed to your situation and budget. It is important that when you consider obtaining individual coverage you work with a specialist who can truly assist you in finding the best fit for you.

As all industries are always trying to find a need that appeals to the mass markets, insurance companies have come up with a way of adding a disability rider to your term life insurance policy for those that desire the combined coverage. This type of coverage would be ideal for those who work in occupations that require and rely on the constant use of their bodies and frequent physical activity. Having some security in knowing bodily injury would not mean complete financial ruin makes a term life policy with disability rider an asset worth considering.

What Exactly is a Rider?

A “rider,” which may also be known as an “endorsement,” adds more coverage to an existing policy. You must purchase a rider at the same time you buy your term life insurance policy . Riders modify an original policy and its provisions override anything in an original life insurance policy. For instance, if you buy a term life policy and there is any conflict between the provisions of the term life and the disability rider, the rules of the disability rider would take precedent.

Riders may also exclude or remove coverage from your term life policy , but in most cases it adds to it. It is best to contact a financial advisor for a term life with disability rider quote as prices may vary. Riders, of course, will add to the premium of a regular term life policy because you are benefiting from extra coverage.

Adding a disability rider to a term life insurance policy will pay the owner of such policy a pre-determined amount of income after the insured has been disabled for a specified amount of time. The waiting period varies from carrier to carrier. The waiting period is the time immediately after the insured is determined to have the disability in their claim. No benefits are paid during the waiting period so it is always best to have some kind of emergency “cushion” in your bank account to cover yourself while you are unable to earn an income.

An important factor to consider when you buy term life with a disability rider is that you may not purchase a face value amount more than the average income you have earned over the last two year period before your disability is determined. With this coverage, you will not be paid more than you were originally earning prior to your disability. You are not allowed to make more being disabled than you were earning in a completely healthy state.

Additionally, the disability with term life rider will only kick in after all of the other benefits for which you are eligible take affect. For example, you will first be paid by worker’s compensation, social security, lost wage policies and/or any other salary continuation plan of which you are eligible through your job. The disability rider will then compensate you for the remaining balance of what those other agencies do not pay equaling what your current average salary was over the last two years. You will have to check with your carrier as to how long your benefits will be in affect after you are determined disabled. Some carriers give you a two year limit of benefits and you may need to look into other options if you think you may need longer coverage.

Peace of Mind

Only you can determine if adding a disability rider to your term life insurance policy is worth the extra expense. If you rely on your body and your occupation is physically demanding, it may give you peace of mind knowing you have extra coverage in the event you should become disabled and unable to continue your employment.