Group disability insurance is similar in form to individual disability insurance. It covers a percentage of an insureds income upon a disabling accident or event. The two main differences are the conditions upon which a person may apply, and the requirements for acceptance. Before applying through a group a person must satisfy the waiting periods and employment requirements of the group. However, once an application can be made the conditions for acceptance are usually less strict than with an individual policy.
Group disability insurance is not necessarily a guarantee of
coverage. There are many rules, set forth by federal and state law, which must be followed closely in order to obtain coverage. Also, group disability coverage is not health insurance. It does not pay for medical bills. It merely replaces a percentage of income.
When evaluating your needs you need to keep three things in mind:
Definitions of occupational coverage vary widely. Some companies will cover you if you are not able to perform your "own occupation " -- this is the best coverage. Other companies will only cover you if you are unable to perform "any occupation" -- this is the worst coverage. There are also many variations in-between.
Elimination periods. This is the length of time before coverage "kicks in." This can be anywhere from 30 days to 2 years or more.
Benefit periods. This is the amount of time that the coverage will last. This may be from 30 days to age 67 to life.
There are hundreds of companies that underwrite disability insurance
policies. Choosing between them is mostly a matter of price vs. financial stability, as well as what health and occupational ratings you might qualify for with each one.
It is important to know that purchasing disability insurance policies is not a quick process. Providers may require that you take a para-medical exam above a certain policy size. Likewise, providers may request medical records from your doctors, often pull driving records, and request financial information.
Therefore, we suggest you work with an insurance agent or advisor you trust. It costs you no more than buying online, and can save you lots of time and money.
Long-term disability is what most people think of as disability insurance. It protects for a long period of time, as long as the insured's life. It usually covers 60% of the insured's income or more. However, long-term disability can take a while to start paying.
Short-term disability is for smaller, less serious, disabilities. It covers for a shorter period of time, usually only as much as 30 days. However, it starts paying sooner, sometimes as fast as immediately for accidents and only 7 days of waiting period for sickness.
Everything you have and everything you hope to have depends on your continued ability to go to work each day.
In fact, it is your earning power that is the one asset that allows you to have all the others.
Your income is doing a double job for you. It is providing today's basic necessities and luxuries as well as serving as the foundation of your future plans. As long as you have the ability to earn an income, you are able to accumulate assets.
But what would happen if a disability should strike?
Your need for the basic necessities of life would continue.
Plans for retirement, children's education, etc. would have to be put off, if not forgotten altogether.
You would have to do without luxuries, yet would still be obligated to meet such fixed expenses as mortgage, car and credit card
Ask yourself this question:
Is my most valuable asset as well protected as my other assets?
In other words, have you made sure that if your income stopped because you were sick or injured and couldn't work, you wouldn't have to worry about how your bills were going to get paid? If you think you are already protected, think again.
Most alternatives to replacing lost income are only halfway measures.
You can't rely on Social Security.
Qualifying for Social Security benefits is very difficult because the disability must prevent you from doing any kind of work - not just your usual job. Even if you did qualify, 57% of Social Security disability applications are denied at the first decision level.
If you think you could get by on Social Security benefits, consider this. The maximum payment in 1998 for an eligible 30-year-old earning $68,400 or more is barely $1,568 a month! Could you live on that?
You can't rely on Worker's Compensation.
Worker's Compensation only covers job related sickness or injury. In addition, these benefits are
You can't rely on your savings, on your family or on a bank loan.
If you saved just 5% of your income each year, a six-month disability would wipe out 10 years of savings, and when savings are gone your other assets would begin to dwindle as well. After your savings depleted rapidly, would family or friends be so willing to help you out? Even a bank wouldn't want to give a loan to a disabled person with no income and no guaranteed prospect of being able to repay.
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