WHAT IS DISABILITY INSURANCE?
THE ELIMINATION PERIOD
Both of these insurance options have a specified time period that the person in question has to be considered disabled prior to receiving benefits. This is referred to as the elimination period. During this period, if the person is able to return to work, or find work elsewhere, they are no longer eligible for either long or short time disability benefits.
ARE THERE ANY GOVERNMENT DISABILITY INSURANCE PROGRAMS?
There is also a government program that can provide disability insurance for those who qualify. Two of the most popular programs include the Federal Insurance Contributions Act – also known as FICA. Employees who have paid into this tax for a certain length of time are considered to be eligible to receive Social Security Disability Income Insurance. However, there are strict requirements that have to be met in order to qualify.
Many people are unaware of the fact that disability insurance can come in an array of forms. It can also be purchased from an array of insurance companies. The cost of disability insurance depends on a few things. Factors like the how long the person is able to receive the benefit, how long the elimination period will be and how specific the definition of disability is under the policy in question.
Every policy is able to have a unique definition of what is actually considered to be “disabled”. Because of this, it is crucial to understand what this definition is and what it means prior to purchasing the policy.
WHAT ARE THE MOST COMMON DEFINITIONS OF “DISABILITY”?
The two most common definitions of “disability” that are used in life insurance policies are:
Any Occupation: When a person is considered to be disabled if they are unable to do any job at all.
Own Occupation: A person is considered disabled if they are no longer able to do the job that they had before the injury occured.
It is important for those looking to purchase disability insurance to know that if everything else in the policy seems equal, the insurance policy that has the more defined and strict definition of the term disability will cost more.
The United States Social Security System is extremely strict as to what their definition of disability is. This can make it quite difficult to qualify for disability payments under the program. Employees who have recently become disabled and who qualify for the program can’t receive this income insurance for at least one full year. Income insurance payments begin to be paid out on the sixth month of disability.
WHAT EXACTLY IS TOTAL PERMANENT DISABILITY INSURANCE?
Total permanent disability -also known as TPD, or permanent total disability, means that an individual is no longer able to work due to serious and long lasting injuries. This applies to cases in which the individual may not ever be able to work again.
There are a number of reasons for total permanent disability. The person may have lost the use of his or her limbs, perhaps something has happened that led to a permanent loss of memory, whatever the injuries are, they must be preventing the policyholder from being able to work in the same capacity that they could prior to the injury in order to be considered total permanent disability. If the individual returns to the workforce in any capacity, coverage stops.
Insurance companies often classify disabilities by the amount of work that an individual is capable of doing. So, temporary disabilities or temporary partial disability, prevent a person from working full-time or at all for a period of time. Where as, permanent disabilities that put an end to the individual being able to work full-time for the rest of his or her life, are referred to as permanent partial disability. And total permanent disability means is the classification of someone who will never be able to work again.
PURCHASING INDIVIDUAL DISABILITY INSURANCE
Many individuals opt to insure themselves against total permanent disability. This is done through what is called a permanent disability policy. The amount of the permanent disability benefit is usually a fixed percentage of the policyholder’s median income. In some cases, it is based on the median income of workers in the applicant’s geographical location. With a permanent disability policy, there is no limit on the number of weeks that a policyholder can receive benefits.
Depending on the situation, the law may allow an individual who is on total permanent disability to take part in certain business activities. This is dependant on a few things. One of them being whether or not the benefit that is provided from a disability policy, in addition to the income earned from the work activity does not surpass a specific amount. Students who face total permanent disability may have their student loans discharged under certain conditions. One of the most important being that the injury is expected to last at least a certain period of time or potentially result in death.
WHAT ARE THE REQUIREMENTS TO QUALIFY?
It is not likely that someone will qualify for permanent total disability benefits until the injury or medical condition is considered fixed and stable. This means that as long as there are additional,potential treatment options available, or your medical professional believes that you may improve as time goes on, you will not be considered “permanently and totally disabled.” Now, this does not necessarily mean that no one in this situation can ever receive total permanent disability benefits. It does, however, mean that the person will have to be patient and wait until their medical treatment is done.
WHAT DOES WAIVER OF PREMIUM FOR DISABILITY MEAN?
Waiver of premium for disability is a lesser known provision in an insurance policy. It is there to state that the policyholder will not be held responsible to pay the monthly or annual premium should they be seriously injured. Now details of this can vary as insurance companies can alter in what their definition of a disability is. They can also vary on when the waiving of the premium begins, as well as for how long it will last. Some insurance companies may also charge a higher premium to include this waiver in the policy.
There are two types of insurance policies that generally include a waiver of premium for disability. These are disability insurance and life insurance. In many cases this waiver is crucial. It often means the difference between the insured being able to keep the policy valid or having to give it up. This waiver is especially vital for disability insurance because if the insured was forced to pay premiums after getting hurt and becoming disabled, they would not be protected against what they were actually trying to insure against.
HOW DOES THE WAIVER OF PREMIUM FOR DISABILITY WORK?
Although this is not always the case, often, this waiver applies retroactively to the time that the disability was detected. This means that the insured made premium payments while the waiver was in place, those premiums are generally returned. The majority of people with any sort of disability insurance opt to have this rider attached to their policy because in the event of a disability. This is because it allows the policy to keep going and functioning normally. It keeps things like the death benefit, dividends and cash values in place and unaffected. When the disability ends, the policy owner is then responsible to begin making premium payments again.
If disability insurance of any sort is something that you are interested in either purchasing or learning more about, speak with a CS Insured representative today!