Is This A Product I Should Have?
There is a legitimate argument that it may be the most important financial product you own. Too many people go through life without owning an individual disability insurance policy because they either rely on LTD through their employer, or they just never thought about protecting their income against an unexpected illness or accident. This is a product designed to protect a large portion of your income in case you are no longer able to work because of something like cancer, heart disease, or some other illness or accident that prevents you from bringing home a paycheck.
What Does Individual Disability Insurance Cover?
Most people think about something like a car accident causing them to become disabled, but the reality is almost 89% of long term disabilities are caused by an illness.1 Major illnesses like cancer, heart disease, and ALS are certainly covered, but one of the leading causes is musculoskeletal/connective tissue disorders causing almost 29% of claims.1 If you have a high quality policy, it will also cover mental/psychiatric disorders2, as well as neurological disorders. Injuries and accidents only account for about 10% of long term disabilities.
Nobody ever believes they are ever going to become disabled, one of the toughest parts of being in this business is answering the phone calls from people who were just diagnosed with diabetes, MS, or some other diseases that will most likely result in a claim at some point down the road. It is no fun telling them that they are now uninsurable because they didn’t buy a policy while they were healthy. There is a reason that a large percentage of physicians own a policy, they see what can happen to the human body every day, they understand the risk, and they want to protect their income.
Every policy is not the same and the level of coverage depends on the carrier and product you choose to protect your income. This is not the type of insurance to compare based on cost alone, the provisions within a policy dictate what is and what is not covered. It is important to understand the differences before you decide which company and product is going to protect your most valuable asset, your ability to earn an income.
How Does Individual Disability Insurance Work?3
Now that we have discussed what is covered, let’s go over how a policy works. If you become sick, or have an accident that prevents you from being able to work, you file a disability claim. An insurance company representative will contact you and help you understand the entire process. Every policy has several components to it, and you have to decide at the time of purchase how you want to structure your policy based on your needs.
You have to decide on the monthly benefit amount you want to have (typically up to 60% of your income), the elimination period, the benefit period, as well as which optional riders you feel are necessary.
If you become disabled and file a claim, you have to satisfy your elimination period. Think of this as a deductible, it is the period of time from the onset of your disability until benefits begin to accrue. The most common choice among consumers is 90 days, however you can choose to have a 30, 60, 90, 180, 360, or 720 day elimination period. If you have a 90 day elimination period, and are disabled throughout the elimination period, and have provided satisfactory proof of loss, your benefits will begin to accrue in the 4th month. A benefit check would typically be issued at the end of that month.
During a period of disability, the amount of your monthly benefit check depends on whether you are totally disabled or partially disabled. If you are totally disabled you receive 100% of your total monthly benefit that you purchased when you bought the individual disability insurance policy. If you are partially disabled, and you purchased a rider designed to cover periods of partial disability, you may be eligible to receive a percentage of your total monthly benefit based on the terms of the policy. Your benefit eligibility would continue every month until you no longer qualify for benefits under the terms of the policy or you reach the end of your benefit period.
The benefit period is the maximum length of time you can receive benefits. There are also several choices available for benefit periods, but you have to choose the one that works for you when you initially purchase the policy. The most common choice in the industry is “To Age 65”, meaning your benefits would stop when you reach the age of 65. You can choose a 2-year benefit, 5-year, 10-year, To age 65, To age 67, or To age 70. There is even a graded lifetime benefit rider available “if price is not a consideration”).
Most disabilities tend to resolve themselves within a couple of years, but nobody wants to be the person who purchased a 2-year benefit period and became permanently disabled.
How Much Does Individual Disability Insurance Cost?
On average, people tend to pay about 1-3% of annual income for a policy. Women pay more than men do for DI, but men pay more than women for life insurance. The older you are, the more expensive the cost of disability insurance coverage is going to be. One of the benefits of buying a policy at a younger age is that you can lock in your premium for your entire working career.
The best policies are non-cancellable and guaranteed renewable, meaning the insurance company can never change the rates on you. When you buy a policy at a younger age you pay less per year over your career. Also, because you are likely to be healthier when you are younger odds are better that you will get a policy with fewer exclusions for pre-existing conditions than you would if you wait to buy disability coverage.
How Do I Apply?
We try to make the process for applying for a policy as easy as possible. When you use the instant quote resource on this page, you can actually fine tune the proposal by selecting an amount that works for you. Once you have decided how much you need, you can fill out an application online.
One of our disability insurance agents will be assigned to your case, and will help you through the entire underwriting process. The process takes about a month to complete, it may or may not require a blood test, a review of your medical records, and a telephone interview. The requirements are different depending on the amount of individual disability insurance applied for.
1. 2014 Long-term disability claims review, Council for Disability Awareness.
2. Benefits may be limited in some states or with certain occupations.
3. An individuals eligibility for benefits is determined on a case-by-case basis, taking into consideration the factual circumstances presented as well as the terms and conditions of his/her policy(ies).
2016-21638 Exp: 4/30/2018