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Disability Insurance FAQs

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Disability FAQs

Is an own-occupation definition important?

When would I not want an “own-occupation” definition policy?

What do they mean by definition of disability?

What else should I look out for?

Are the premiums guaranteed?

I have Disability Insurance at work. What’s the difference between individual and group coverage?

What are some of the differences of group long-term disability insurance and individual disability policies?

What are the benefits of having individual disability insurance?

What plans will you show me?

Should I buy a disability policy or a long-term care policy?

Is an own-occupation definition important?
Certainly the most sought definition of total disability is the own-occupation definition. If you are no longer able to work in your occupation you will be considered totally disabled and will receive monthly benefits. These benefits will continue, even if you go back to work in another occupation…just so long as you are unable to perform the duties of the occupation in which you were engaged at the time of disability. If you're an anesthesiologist and due to carpal tunnel or some other disability you may not be able to perform an epidural; however, you may be able to teach or supervise others to do so. If you occupation is specialized this definition can be crucial, but if it's not it's not. The trick is that your duties of your pre-disability job can't transfer to your new job. Ask yourself this simple question..."If I couldn't perform the duties required to do my job, could I do something else?" For me, the answer is no, but for the anesthesiologist the answer would probably be "yes."
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When would I not want an “own-occupation” definition policy?
Either cost or additional benefits gained. There's only a few situations where the own-occupation policy may pay more, but some of the loss-of-earnings contracts pay an additional 50% of benefit for a catastrophic disability. This loss-of-earnings policy looks at your income after the disability and pays a proportion of the benefit to your lost earnings. If you are making the same amount of money after the disability you will not receive any additional benefit from the policy - makes sense. You don't want a policy, if you can help it, that will stop paying anything if you're working in a new job making less money. We're not biased, so we'll help you find the best policy, and when we get you the policy we'll get paid by that insurance company.
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What do they mean by definition of disability?
When looking at Disability Insurance Policies there are some main points that are critical to a quality contract. First, we intentionally use the word contract. A disability insurance policy is a contract between the insured and the insurance company. Benefits will only be paid based upon the definitions and wording in that contract.

The most important definition in the contract is the "definition" of disability. This definition is the crux of the plan. As an insured you want this to be simple and easy to understand. In law school they use the position of the "reasonable person" to determine if a case has merit.

If a reasonable person (you) cannot easily understand this definition and how/when benefits are to be paid then the plan should probably not be purchased.

If the definition appears ambiguous to you then it will be subject to interpretation by the insurance company at claim time. It's important to realize that the more ambiguous the Definition of Disability, the lower the premium.
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What else should I look out for?
If you compare multiple policies and one is significantly less than the others don’t buy it. It could be that the premium is not guaranteed and probably will increase over time. Also, it could be that it only has an “own-occupation” definition for two years and switches to an “any-occupation” thereafter. This means that after two years of the disability if you’re able to work, regardless of the amount of money you’ll earn, you’ll no longer receive any benefit. These policies would only pay benefit if you’re totally disabled. For some blue collar occupations this may be the only thing that’s available. In that case do what you can.
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Are the premiums guaranteed?
For the plans we sell the premiums are guaranteed to stay level to 65 unless otherwise noted as step rate, which is level for the initial period and then "Steps Up" to a guaranteed level premium to age 65. All plans waive premiums during Disability. Be careful of plans that aren’t guaranteed. It's not a big deal if the plan is only “guaranteed renewable” because most plans are. Usually only high risk plans are conditionally renewable. Almost every other insurance policy is guaranteed renewable which means that the policy will remain in force so long as you pay your premium – no matter how high the company raises that premium. You want a “non-cancelable” policy meaning once the company issues the policy the premium is guaranteed.
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I have Disability Insurance at work. What’s the difference between individual and group coverage?
There are two major types of disability insurance available to employees; group long term disability (LTD) insurance, and individual disability insurance. A group long term disability insurance plan typically is designed to replace 60% of base salary to a monthly maximum spelled out in the policy. In our experience a majority of group LTD plans on the market typically cover 60% of base salary to a maximum of $5,000 a month.

Group long term disability insurance is taxable to an employee who goes on claim assuming the employer was paying the premiums for the coverage. The only way to make up the lost taxes during a claim is to have purchased an individual disability insurance policy that layers on top of your group coverage before the claim ever happened. Having both group long term disability and an individual disability insurance policy allows the you to have the maximum income replacement available during a disability insurance claim. It also gives you the power to know that if your employer ever dropped the coverage, or you ever left your current position, that you would still have disability insurance on your own.

Many people earning an income over $100,000 a year are severely under insured when it comes to group long term disability insurance. Since the monthly maximum is usually around $5,000 a month, any income over $100,000 a year must be insured with individual disability insurance layered on top of the group plan.
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What are some of the differences of group long-term disability insurance and an individual disability insurance policy?
• Benefits are taxable if your employer pays the premium with both types of policies.
• More restrictive definitions within the policy for group, but the individual plan may cost more.
• Many have a 2 year maximum on mental and nervous disabilities in our experience whereas you have the ability to avoid that with an individual plan.
• 2-year own-occupation – any-occupation thereafter for most group plans. Individual plans may have this same definition, but when you shop on your own you can usually find (when available) plans with longer own-occupation definitions. This may bring an added cost of course.
• Benefit lowered by Social Security, worker’s compensation, sick pay, etc…
• No rate guarantees – rates will rise
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What are the benefits of having individual disability insurance?
Benefits are received to you tax free if you pay the premium
More liberal definitions within the policy to pay you more money in more claims scenarios
Guardian has no mental or nervous restriction (others do)
Higher monthly benefits in the $10-15,000 a month range
Rate guarantees to age 65
Fully portable if you ever leave your current job
Guarantees your insurability for the rest of your working years
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What plans will you show me?
We only show you companies that our clients have had good experiences with at claim time. If you heard about a different company we’ll be happy to explain the differences to you. If after we explain the differences and you still want that other company’s policy, we can sell it to you. This is the best way to shop. If you get agents competing they may make promises that the insurance company will later not deliver.
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Should I buy a disability policy or a long-term care policy?
Disability protects your income. Long-term care insurance pays for the cost of your care. They’re similar is design, but disability pays on your ability to do your job and long-term care pays on your ability to do daily activities (eat, dress, bathe, etc…). If you can afford both get both. One nice feature that the some policies carry the ability to convert the disability policy to a long-term care policy at retirement (but this is not available in every state).
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