SolveYourProblem eLearning Series:
Health Insurance: Your Questions Answered
What does everything mean & how to choose the right policy
( 18 pages )

DISABILITY INCOME INSURANCE

When a person becomes disabled and unable to work, at some point their income will stop. It might be sooner or later, but unfortunately, life goes on and daily living expenses continue to mount.

Disability income insurance is available to continue at least a portion of ones income while unable to work. It’s sad, but most people give more attention to life insurance than they do about income replacement should they become disabled.

Disability income insurance is available individually or sometimes as a portion of a group benefit provided by an employer in their group package.

Individual policies are most often sold to self-employed and professional people. The amount of the benefit relates to earnings and is matched as close to after tax income as possible. Generally it is up to 60% of monthly net income and there is usually a cap on the amount.

When included as part of a employee group benefit package, disability income policies are usually more liberal than individual plans as far as limitations and exclusions. It is also much easier to acquire coverage. As a general rule, group plans are much less costly to all parties.

Disability income protection should be an element of your entire financial planning. The importance cannot be overestimated because it relates to your overall family finances. Whatever you situation may be, disability is one of the most important factors when you consider you inability to work and produce income.

Some things to consider when determining disability income needs are:

• Establish the bare minimum required if income stops.
• Determine your retirement needs if work ceases and the ability to pay into the retirement ends.
• Allow for any benefit that might be offset by social security and workers compensation.

Some thought needs to be afforded to the possibility of “total disability.” That definition is important as it is always defined in a policy and different companies may use different definitions.

Interpretation is important as it pertains to the insured’s own occupation and any occupation the insured may be qualified to perform.

The first method used to determine total disability concerns the occupation that the insured is normally engaged in. In this case total disability might be defined as “the insured’s inability to perform any or all of the duties or his or her own occupation.” This is determined by the insured’s occupation at the time that disability begins.

The second method is more restrictive defined as “the insured’s inability to perform the duties of any occupation for which he or she is reasonably qualified by education, training or experience.”

In other words, while you may no longer be able to conduct the duties of your current occupation you may be able to perform activities in a related field.

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