Not All Disability Insurance Waiting Periods Are Created Equal
Another source of confusion is that the elimination periods on disability insurance are all the same. They are not, and they vary by carrier.
Tell me. All things being equal, which carrier would you want?
Would you want this one, on the left?
Would you select this one below?
Do you see the difference?
All things being equal, you want the first one. Why? Because the carrier counts a partial disability towards your elimination period. However, the second carrier does not.
This distinction is important as many disabilities start out as partial, which means you can work, but not full-time.
How disappointed would you be if you developed carpal tunnel, a back problem, or a debilitating illness like multiple sclerosis? You could still work, but only a few days per week. The first carrier will pay a partial benefit for your disability. However, the second carrier wont until you are totally disabled, which could be months or years away depending on your circumstances.
Contact us if you would like to learn more. This underscores, again, why it is important to understand the disability insurance elimination period.
What Are Us Government Disability Benefits
There are two main government disability benefit programs: Supplemental Security Income and Social Security Disability Insurance . In 2016:
- SSI capped payments to qualifying individuals at $733 per month and to qualifying couples at $1100. SSI is also subject to strict income and asset limits that can prevent you from saving money or ever going back to work even if you feel up to it.
- SSDI paid disabled workers supporting a spouse and one or more children an average of $1983 per month. That number was slightly higher for a retired disabled couple and much lower for a single disabled worker .
Accessing government disability benefits means undergoing an expensive, invasive and often years-long legal process. To access the more desirable SSDI income, you must also have a strong track record of work, which can be prohibitive for workers who become disabled when they’re young.
For these reasons, its important not to rely on government disability coverage to replace your income especially if you are supporting a family. Private disability insurance can bridge the gap and its benefits period can be just as long as that of government benefits.
Social Security Disability Benefits Period
You can continue to receive SSI until your death. However, you must continue to prove your eligibility over time. SSDI payments last until retirement age when they automatically convert into Social Security retirement benefits.
Short-Term Disability Insurance Benefits Period
Now You Know Why The Disability Insurance Elimination Period Is Important To Understand
We hope you learned what the disability insurance elimination period is and why it is important to understand. To recap:
- Most people mix up the definition with waiting periods on other types of insurance. The waiting period on disability insurance is completely different compared to other types of insurance.
- Carriers have different definitions themselves.
- You can save money if you know how the disability insurance elimination period works.
Would you like our assistance or have questions? Feel free to contact us or use the form below. We are happy to review any policies you have or discuss your situation.
Unlike other agencies, we have your best interests first. There is no risk of contacting us. If we cant help you, we will point you in the right direction as best we can.
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What If I Recover And I Become Totally Disabled Again
If you received disability benefits, recovered from your illness, and then became totally disabled again, the elimination period would be waived if you were back at work on a regular basis for less than:
- one month, if the two periods of disability are due to unrelated causes
- six months, if the two periods of disability are due to related causes
- twelve months, if the two periods of disability are due to the same cause.
Talk To An Ontario Lawyer About Your Case
At Preszler Injury Lawyers, our Ontario personal injury lawyers may be able to help you build a compelling case and challenge a long-term disability insurance carriers decision to deny a qualifying claim. We serve Toronto and nearby areas. We may come to you if your injuries prevent you from traveling to our office.
Call today to learn more.
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How Do Earnings From Rehabilitation Employment Affect My Disability Benefits
Normally, your monthly disability benefits will be offset by earnings you receive from other sources only to the point where your total income while working, together with any benefits you are receiving under the Disability Insurance Plan, exceeds the insured salary on which your benefit was based. In other words during rehabilitative employment you can earn up to 100% of your pre-disability salary.
Pros & Cons Of Disability Insurance
Disability insurance can be a smart way to protect your ability to earn an income. If you are the primary earner in your household, having disability insurance in some amount can help cover necessary monthly expenses should you get sick or injured. Some employers offer disability insurance at little to no cost in most cases. Others may have to seek out disability insurance through a private insurance company, which comes at a cost.
Disability insurance requires a premium payment that is determined by your age, gender, and health status. Additionally, disability insurance companies offer different levels of benefits depending on your annual income. The higher your income, the higher the payment you may receive if you are sick or injured. This, however, increases the cost of your policy. Similarly, those in poor health, higher age, or smokers will pay more for a policy. To determine if disability insurance coverage is worth the monthly investment, be sure to compare the cost of the policy with the benefits it pays, as well as the elimination period.
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How Does It Affect Payout
You will not receive your disability insurance benefits until the elimination period is over. Once it passes, benefits are paid out, typically on a monthly basis, until you are able to go back to work or for as long as the policy dictates. In most cases, disability insurance pays between 40 percent and 80 percent of your income once the elimination period is met depending on your policy.
Recurring Disabilities & Elimination Periods
Most carriers waive the elimination period if you file a second claim on the same condition where you previously satisfied the elimination period. For instance, if you are diagnosed with cancer, are out of work and on disability for a year, recover, go back to work, but the cancer returns, you wonât need to wait out another elimination period. Youâre immediately eligible for the disability benefit. However, if you suffer from a different disability, youâll need to wait out the elimination period again.
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Which Employees Are Considered A Key Person
Key persons exist in all companies, and are not defined by occupation, salary, or title alone. Key persons may be employees or employers. Their performance and value dictate the success or failure of companies.
Typically, we consider key employees to be top sales people who hold large accounts or executives that maintain important business relationships. While this may statistically be the most common use for key person disability insurance, it is not the rule. A key employee is anyone who provides significant value to a company and whose long-term absence would cause significant loss to that firm.
Examples of key employees include:
- A well-known doctor or surgeon who attracts patients.
- A hairstylist who is on the cutting edge of fashion.
- A stock market expert who seemingly can foresee the future.
- An entertainer whose popularity brings in the crowds.
- An architect whose unique designs are in high demand.
- An internet technician who single-handedly supports a companys companies network.
- A chef whose menu creates a line around the block.
- A dentist whose charisma keeps her clients smiling.
The loss of a key person can be devastating, not only affecting the profitability of the firm, but also productivity, customer relations, employee morale, and the general the overall effectiveness of the firm.
Key person disability insurance provides financial protection for the company if a key person were unable to work due to a disability.
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Who Is Eligible To Receive Benefits
You are eligible to receive benefits for up to 24 months if you become totally disabled . If, at the end of this 24-month period, you are unable to perform any commensurate occupation for which you are reasonably qualified by training or experience, your benefits would be continued. For the purposes of the Plan, âcommensurate occupationâ means one for which the rate of pay is at least 66 2/3 per cent of the current rate for your regular position. Thus, if your disability prevents you from doing your job, and later a commensurate one, the benefits continue for as long as you remain disabled, but not beyond your 65th birthday.
You are not eligible for benefits if your disability:
- is related to a condition that existed when you became insured – you may contact your departmental Compensation services for information concerning the waiving of this restriction)
- arises from commission of a felony, self-inflicted injury or attempted suicide
- is the result of injury or disease sustained on active duty with any armed force, or from active participation in a riot, rebellion or insurrection
- results from an act of declared or undeclared war .
If you become disabled, you should consult your departmental Compensation services or the Public Service Pay Centre even if you are unsure whether or not you qualify for benefits.
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What Are My Responsibilities Related To The Rehabilitation Program
You are required to make every reasonable effort to facilitate recovery from your disability. This includes your full participation in an approved Rehabilitation Program and your acceptance of any reasonable offer of modified duties that your employer can put in place. You must also try to retrain for employment in a commensurate occupation where it is apparent that you will not be able to return to your regular occupation within the first 24 months that you receive disability benefits. The Insurer may withhold or discontinue your benefits if you do not comply with the above conditions.
To 120 Days Is Optimal
At the same time, you donât have to stretch your elimination period to 180 days or a year to afford coverage.
Once elimination periods reach 90 to 120 days, there is little cost savings to be had by increasing the elimination period. Thatâs because if your disability lasts that long, it will typically take longer for you to recover. Therefore, there is little additional risk to the insurance company if they have to provide benefits after 90 days as opposed to 120. So the premium costs between these elimination periods will be negligible.
To get optimal coverage for the cost, your best best will typically be a 90-day elimination period. If you believe the savings are significant enough, you could also opt for 120 days. But under most circumstances, you should not go higher than 120 days.
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Will I Automatically Get Disability Benefits Once My Waiting Period Ends
No. Theres a lot more to your long-term disability plan than just an elimination period. Your LTD policy includes a vast number of terms and conditions. Before you qualify for long-term disability benefits, youll need to satisfy them all.
Here are some of the most important policy requirements youll need to look out for.
How Do I Get Disability Insurance
Many employers offer disability insurance to their employees at no cost or at a discounted group rate, so check with your employer to see if a disability insurance policy is available. If your employer doesnt offer disability insurance, or if you are self-employed, you can also consider looking into an individual disability insurance policy. Even if you do have an employer-sponsored plan available to you, you may wish to purchase additional coverage through an individual policy.
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What Is The Elimination Period Of An Individual Disability Insurance Policy
A disability insurance elimination period is how long you have to wait before the insurance company will pay benefits. It might be easiest to think of it as a health insurance deductible. The longer you wait for disability benefits to kick in, the lower your premium.
Elimination periods range from 30 days to two years and the most common period of time is 90 days. Policies get cheaper with longer elimination periods because the number of illnesses and injuries that keep you from working for that long decreases. There is a high frequency of issues for short periods of time, but fewer for long periods. Itâs why a short-term disability policy is much more expensive than long-term disability insurance, and why long-term disability insurance is so important: Low frequency, high liability risks are the most important times for insurance.
Once the elimination period is up, assuming the disability meets the definition of disability and isn’t caused by a pre-existing condition that has been excluded, your benefits will be paid out.
Keep in mind the elimination period is not the same as a probationary period, a period during which you cannot file a claim. Learn more about the differences between elimination periods and probationary periods.
Elimination Periods And Long
Before buying LTC insurance, make sure you know the terms of the elimination period. Most policies require policyholders to need consecutive days of services or disability.
For example, if your elimination period was 90 days, you would need to be in a hospital or disabled for 90 consecutive days before any coverage begins. Accumulating 90 days in total over a specified period of time would not qualify you for coverage.
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How Long Should The Elimination Period Be
The length of time of an elimination period varies from policy to policy. Some policies have a 30-day elimination period. Some are as long as two years.
Before selecting a policy, think about your other sources of income and what savings or other assets you have. These factors can help you determine how long you can sustain yourself and your family without income or insurance benefits.
If you have significant savings, you can get away with a policy that has a longer elimination period. If you have minimal savings, youll want a shorter elimination period.
The most common elimination period is 90 days.
There Is Only One Thing To Watch Out For
There are some policies on the marketplace that require an elimination period be satisfied with a total disability only, or with consecutive days of disability. Be cautious of a contract that does not allow an elimination period to be satisfied with either a residual, or a total disability. Also make sure they have an accumulation period so that you can finish your elimination period in the shortest amount of time. Typically an accumulation period allows 7 months for a three month elimination period .
These are the personal views of the author and do not necessarily reflect the views and opinions of The Guardian Life Insurance Company of America or its subsidiaries and affiliates thereof.
Check the background of your financial professional on FINRA’s BrokerCheck.
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. Some of this material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named representative, broker – dealer, state – or SEC – registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.
Copyright 2021 FMG Suite.
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Elimination Period Vs Probationary Period
A policyâs elimination period is not the same as a probationary period.
A probationary period is a length of time between when the policy is issued and when you can file a claim for benefits. Itâs a period of time designed to protect the insurance company from fraudulent claims. Probationary periods may be 15 days or longer.
During the policyâs probationary period, you cannot file a claim with the company, even if your application is approved and your disability is legitimate. Once youâre notified that the probationary period is over, you can file a claim if needed.
With an elimination period, you can file a claim, but you wonât receive benefits until the period has expired.
How Does The Elimination Period Work
When you apply for a disability policy, youll be given a choice of elimination periods. The most common elimination period is 90-120 days which means your benefits wont be paid out for 3 or 4 months but the options available to you will depend on your insurer and policy.
- Short-term disability. Short-term disability policies cover short-term needs, so theres typically less time to wait before you start receiving benefits. Most policies have an elimination period of 1-10 days, although a handful of policies may offer other options. The policy starts paying out once that period of time has elapsed, and will continue to pay until your benefit period is up.
- Long-term disability. Long-term disability plans usually come with elimination periods of 30, 60, 90, 120, 180 or 365 days. The longer your elimination period, the cheaper your policy will be. This is because the range of illnesses and injuries that could put you out of commission and work for that long decreases over time.
Essential things to know about the elimination period
These are some of the key features of the elimination period:
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