It sounds kind of basic doesn’t it? Buy disability insurance and if you get hurt in any way you will have an income and your assets will be protected and your family will be provided for. Right? Nothing could be further from the truth. Every disability insurance policy from every insurance carrier is different. If your personal health plans has an accidental injury rider attached that is not disability coverage but is often confused as such.
When buying disability insurance do lots of homework, research, and buy from a nationally known carrier that has been in business a long time. When considering which plan to buy, do not choose the low bidder!
For the purposes of this blog I will be writing about long term disability (LTD). Short term disability will be covered at another time. The specific criteria that must be met to claim disability are as follows:
- You must be employed at the time of the disability and not be able to perform your duties for a continuous period of eight days
- You may not receive weekly Workers’ Comp benefits that are equal or greater than the disability benefit
- Most carriers have a pre-existing clause in the policy that applies to medical conditions you had when you bought the policy for anywhere from 12 to 24 months.
There are three basic types of disability insurance:
- True Own-Occupation is the most comprehensive of total disability policies available. This type of policy will pay if you are unable to perform the duties of your regular occupation. The insurance company will consider your regular occupation to be the one you are doing when you became disabled. Why is this important? Most people will not want to sit around all day, every day, doing nothing. This policy will allow you to work and still collect as long as you are unable to perform in your occupation, even if you choose to work at something else.
- Modified Own-Occupation Most insurance carriers today who have stopped offering True Own Occupation coverage will instead offer Income Replacement Insurance. This is where you must read the fine print. Income Replacement Insurance starts out like True Own except for one major difference; you may NOT work at any other occupation and still collect the benefit.
- Gainful Occupation Coverage You will usually see this in an employer sponsored group long term disability policy or sometimes with your property and casualty insurance.
According to the web site About Disability Insurance.Com, it will be worded something like this:
“Because of sickness or injury you are unable to perform the material and substantial duties or your occupation, or any occupation for which you are deemed reasonably qualified by education, training, or experience.”
The problem with this definition is that the determination of if you are disabled or not is largely left up to the insurance company. Hate to say it but sort of like letting the fox watch over the hen house.