Insurance Services

Risk Management

Life Insurance

Long-Term Care

Disability Insurance

Disability Insurance:

Your earnings ability is probably your largest single asset, and its loss would have a devastating impact on you, your family, and your business (if applicable).  But it is more likely to occur than the loss of your car or house, things you’ve probably already planned for.  In fact the odds of suffering a disability lasting at least 90 days are about one in four.  A solution to protect for this event is disability insurance.

Our process with disability insurance:
When we sit with a client to discuss the option of disability insurance, we first look over any existing coverage they have, as well as other sources of income and assets that could be used to supplement income in the event of a disability.  We then calculate the amount they would need and go over the various contract options, timeframe of coverage, and definitions of disability that they could get.

What is a disability?
A disability is an impaired condition, verified by a doctor, that prohibits some or all of your capacity to function at your current job.  The disability can be physical, psychological, or a combination.  The severity and how long the disability lasts can vary from a few days to a lifetime.

Who needs disability insurance?
The necessity for disability coverage can be determined rather simply.  If you were unable to work, would your existing resources be able to supplement your income and other needs?  If not, then disability coverage should be considered.  This need has been realized by many larger employers, which now often provide both short and long-term disability coverage as a benefit to employees.

What kinds of disability insurance are there?
Disability insurance can be segmented into two types, short-term and long-term.  Short-term usually refers to policies that start anywhere from one week or one month after the disability starts and typically last anywhere from three to six months.
Long term disability refers to the policies that start after the short term policies expires. They can last anywhere from two years to a lifetime.
Price flexibility on the policies is extensive, as the timeframe of coverage will determine the cost, as well as the amount of the coverage you elect.  The percentages of coverage will maximize at around 60% for a personally owned policy to around 70% for a business or employer sponsored policy.  The reason that the employer policy will cover more of your income is because the benefit is fully taxable as income.  The personally owned policies are paid with after tax dollars and are therefore free of tax when you receive them.

Definition of disability
This is an important topic as the definition of disability is a legal term, and there are several definitions used.  The more loosely written the definition, the higher the likelihood you will need to return to work at another occupation and lose your benefits.  Certain definitions will allow you to remain disabled at your previous occupation, and return to a different occupation, all the while receiving the check from the insurance company.  An example is a surgeon that cannot perform surgery due to a severe injury. He can, however, still speak and walk, and would be able to teach at a university and actually earn both checks.  Make sure you understand the rules of the definition of disability for your contract. It is important.  Obviously the higher quality definitions demand a higher premium, but the benefits can certainly outweigh the costs.