Some Disability Insurance coverage characteristics are elimination period (how long you must be disabled before the policy will pay a benefit), length of coverage (how many years it will pay out), percent of income replacement (dollar value of the policy payments), and features that determine benefit triggers, amount, and duration. E.g. An important policy consideration is whether to pay for the "own occupation" feature, which will allow you to collect at least a partial benefit if you are unable to perform your OWN job, as opposed to being able to work at ANY job.
Insurance Broker | Financial Consultant, Lawrence Insurance Consulting, Southern New Jersey
The important factors that will play a large role in both the cost of a DI policy and how meaningful the benefit will be to a individual are; The benefit amount, the elimination period, the duration of the benefit period, and the way in which the policy defines a disability.
The benefit amount, the recurring monthly income your disability policy pays you while you are injured, represents the most important aspect of the coverage. Laws in most states limit disability insurance benefits to two-thirds of your current gross income. While most people select the maximum available benefit, you can choose lower amounts if your personal cash reserves are sufficient to supplement disability income payments.
After you meet the criteria and are eligible to begin receiving income from your disability insurance policy, the length of time you must wait before payments begin is called the elimination period. Most major insurance carriers offer the same standard elimination periods ranging from one month to one year. Longer periods result in lower policy premiums.
Once you begin receiving payments from your disability policy, they will continue until you are no longer disabled or your benefits have been exhausted. Disability insurance policies with maximum benefit periods of two years or less are classified as short-term disability products. If you own a short-term policy, payments will continue every month but will cease after two consecutive years. Policies with maximum benefit periods beyond two years are classified as long-term disability products. The most common benefit period choices for long-term policies are three years, five years, ten years or until age 65.
Every insurance company has its own formal definition of a disability, and benefit payments will not start unless your status falls within these guidelines. Some companies define disability as an inability to perform any gainful income-producing work at all. Collecting benefits under policies purchased from these carriers often presents a significant challenge. Thankfully, a large percentage of carriers consider you disabled if you are unable to perform the substantial duties of your own current employment position, a policy feature commonly referred to as "own occupation." If your injury prevents you from adequately fulfilling the requirements of your current job, you are eligible to begin collecting benefits after the expiry of the elimination period.
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The benefit amount, the recurring monthly income your disability policy pays you while you are injured, represents the most important aspect of the coverage. Laws in most states limit disability insurance benefits to two-thirds of your current gross income. While most people select the maximum available benefit, you can choose lower amounts if your personal cash reserves are sufficient to supplement disability income payments.
After you meet the criteria and are eligible to begin receiving income from your disability insurance policy, the length of time you must wait before payments begin is called the elimination period. Most major insurance carriers offer the same standard elimination periods ranging from one month to one year. Longer periods result in lower policy premiums.
Once you begin receiving payments from your disability policy, they will continue until you are no longer disabled or your benefits have been exhausted. Disability insurance policies with maximum benefit periods of two years or less are classified as short-term disability products. If you own a short-term policy, payments will continue every month but will cease after two consecutive years. Policies with maximum benefit periods beyond two years are classified as long-term disability products. The most common benefit period choices for long-term policies are three years, five years, ten years or until age 65.
Every insurance company has its own formal definition of a disability, and benefit payments will not start unless your status falls within these guidelines. Some companies define disability as an inability to perform any gainful income-producing work at all. Collecting benefits under policies purchased from these carriers often presents a significant challenge. Thankfully, a large percentage of carriers consider you disabled if you are unable to perform the substantial duties of your own current employment position, a policy feature commonly referred to as "own occupation." If your injury prevents you from adequately fulfilling the requirements of your current job, you are eligible to begin collecting benefits after the expiry of the elimination period.