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What Is Private Disability Insurance

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Difference between Private Disability Insurance and Social Security Disability Benefits

The definition of disability will vary depending on your employer’s plan. Some policies consider you disabled when you’re unable to perform your job duties, while others pay only if you’re unable to perform in any job suitable for you based on your training, education and experience. Other policies require that you not be gainfully employed while you’re collecting benefits or that you are unable to earn a certain percentage of your pre-disability income because of injury or sickness.

There are some policies that will pay you a portion of your total disability monthly benefit amount if you have lost a part of your income due to a disability. Other policies and plans may include a rehabilitation provision that requires you to take part in a vocational rehabilitation program in order to continue to receive benefits.

Keep in mind that many policies and plans have exclusions and limitations and may not fully cover certain disabilities and pre-existing conditions. Benefits differ from company to company, so speak with your benefits administrator for your workplaces complete plan details.;

Benefits may begin after you have met an elimination period a plan-defined period of time, starting with the date you are disabled from work and the number of days you must continue to be disabled until benefits may begin. Most group long term disability plans have an elimination period of 90 days or 180 days. Under most group plans, generally the employer selects the elimination period.

The Healthier You Are The Better

This may be the most obvious factor of all. People in less-than-average health who have chronic conditions and/or use tobacco are more likely to suffer disabilities.

When assessing your health, disability insurance companies may request the following:

  • A paramedical exam, similar to a physical checkup, conducted by an independent third party
  • Measurement of height, weight, body mass, pulse, and blood pressure
  • Collection of blood and urine
  • Family medical history
  • Whether you drink or use tobacco

However, there are ways for applicants in great health to bypass the medical exam.

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What You Need To Know About Disability Insurance

By;;on May 17, 2019

If you had a life-changing accident or were diagnosed with a critical illness tomorrow, would you and your family be able to cope?

Ten years ago, Janet Freedman was rushing out the door of her home for work. Her arms loaded with tax returns, she missed a step on the stairs on her front porch and fell, hitting her head on the concrete. When her neighbours found her, she was barely conscious, with her head trapped between her own front steps and those of the house next door.

Paralyzed, with a partially severed spinal cord, it took more than six months of hospitalization and two years of intensive physiotherapy for Freedman to resume her life. She was unable to work and had no one to support her. Thank goodness I had a good private disability insurance plan, says Freedman, a certified financial planner and author of Hit by an Iceberg: Coping with Disability in Mid-Career. Those payments allowed me to concentrate on my rehabilitation and to live my life without worrying about where the money was coming from for daily living expenses. That made a big difference to me and my recovery.

Regular pay if you cant work

When calculating your coverage, keep in mind that payments from private disability insurance are tax-free, while the payout from most corporate plans is taxable.

A single payout if you get sick

Which type should you get?

What does the * mean?

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Tax Treatment Of Benefits

Private disability insurance premiums are typically paid by you, and you receive the proceeds tax-free. If the premiums are paid by your business — for example, as an incorporated professional using money from his corporation — the premiums are added to your taxable income, and any disability proceeds you receive remain tax-free.


Writer Bio

Philippe Lanctot started writing for business trade publications in 1990. He has contributed copy for the “Canadian Insurance Journal” and has been the co-author of text for life insurance company marketing guides. He holds a Bachelor of Science in mathematics from the University of Montreal with a minor in English.

Not All Jobs Occupations Are Treated Equally

The Differences Between a Disability Insurance Lawyer and ...

Disability insurance is designed to protect your income, so it should come as no surprise that your career will have a major impact on your premium rate. Insurance companies classify jobs based on the hazards of the work, as some are more prone to injury or illness than others.

Your occupation will also be assessed based on the difficulty of returning to work following an injury or illness. The more difficult it is to perform a job with certain injuries or illnesses, the more the insurance company will likely have to pay in benefits.

Job occupations are grouped into specific risk classes, which are numbered on a scale of 1 to 5 or 6. Typically, the higher the number, the less risk an insurer considers that profession. The lower the risk, the lower the premium rate.

When you compare policies, you should note that insurers assign different risk classes to the same profession. One insurer may designate a job as a 4, while another may classify it a 5.

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The Disability Insurance Underwriting Process

Your risk of becoming disabled plays a large role in determining how much you will pay for coverage. So how exactly do insurance companies calculate your risk of becoming disabled?

Individual disability income insurance requires underwriting. Whereas group plans help insurers spread their risk among a large group of policyholders, issuing an individual policy requires the insurance companies to assess the risk of a single applicant.

Before you get caught up in the cost, it helps to understand the various factors that insurance companies look at when assessing risk.

Individual Disability Insurance: Everything You Need To Know In 2021

Reliability. It’s the most fundamental component of disability insurance. Because what good is your coverage if it’s not there when you actually need it?

In this comprehensive guide, we cover the importance of disability insurance for individuals and how it makes up for the shortcomings of employer-sponsored group coverage. This includes:

Read on to learn more.

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Social Security Disability Benefits

The Social Security Administration oversees three wage benefit options. Each program serves distinct populations and has unique eligibility requirements.

The advantage is that most US citizens are eligible to participate if they pay FICA taxes. However, only one of the three alternatives could possibly help during a temporary work absence.

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What To Consider When Buying Disability Insurance

Private Disability Insurance Benefit Denial Legal Options

If you’re considering disability insurance, make sure you:

  • check with your employer to see if you already have group disability coverage with your employer’s plan
  • shop around, especially if you’re considering private disability insurance

Consider group insurance offered through a union, guild, or professional or alumni association. Premiums for this type of coverage usually increase as you get older. You’ll need to renew your insurance every few years.

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Disability Insurance Coverage For Pregnancy

Most insurers cover complications from pregnancy and childbirth. Sometimes, this could mean conditions that donât show up until weeks or even months after you give birth.

Long-term disability policies donât insure coverage for a normal pregnancy, even if you miss work during your pregnancy or for maternity leave.

How Disability Insurance Helps Your Recovery

Your insurer may cover the costs of your rehabilitation to help you recover from your disability. Such expenses include training and care expenses as well as modifications to your home, vehicle, or workplace.

Other insurers offer retraining benefits, which pay for the cost of going back to school to brush up on your training if youâve been disabled for a long time. Retraining benefits cover expenses like tuition, books, and equipment, and can be used for vocational and business school.

Disability insurance may even cover you after youâve recovered from your disability. Like partial disability coverage, a small amount of recovery benefits may be paid for a period of time if your disability causes you to lose a percentage of your income.

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How Dependents Benefits And Attorneys Fees Affect The Offset

If Social Security is paying dependents benefits to your spouse or children based on your disability , many LTD policies allow the insurance carrier to offset these amounts as well.

Social Securitys yearly cost-of-living adjustment is rarely factored into the offset.

Attorneys fees are generally not included when figuring the offset, allowing many Social Security disability claimants to obtain essentially free legal representation. While your insurer may offer to provide you with an attorney or a non-lawyer representative to handle your disability case, its usually a better idea to hire an experienced, independent disability attorney, especially if you can do so free of charge.

Every policy is unique, so read your policys summary plan description or contact your insurer to learn how dependents/auxiliary benefits and attorneys fees can affect the Social Security offset.

Other Ways To Find Disability Insurance

Private Disability Insurance Benefit Denial Legal Options ...

The following programs also offer financial help in case of a disability, but they have limitations.

  • Social Security pays disability benefits, but its difficult and time-consuming to qualify, and the payments are low. The average monthly disability benefit in 2017 was $1,172.

  • State disability programs are offered in California, Hawaii, New Jersey, New York and Rhode Island. They provide short-term disability coverage, in most cases for up to six months, according to Life Happens, an insurance industry trade group.

  • Workers’ compensation insurance replaces a portion of income if youre disabled because of a work-related injury. All states require employers to have workers compensation coverage for their employees. Most long-term disabilities, however, are not the result of work-related injuries.

Although these programs can help, they dont fully cover the risks of losing the ability to work after an illness or injury. Disability insurance is the smart bet to provide a safety net for your future.

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What To Look For In A Long

Base policy details

First, look at all the base policy details. This includes the:

  • Elimination period or waiting period

  • Benefit period

  • Policyâs disability qualifications

  • Whether the company offers partial benefits if youâre still able to do some work

Built-in policy features

Next, look at the built-in policy features. These are subject to availability based on your personal profile, but are standard across most companies. Policy features include:

  • Guaranteed renewable

  • Survivor benefit or death benefit

  • Good health benefit

  • Critical illness benefit

  • Catastrophic Disability Benefit

There are even more options out there, like cost-of-living adjustment riders and Social Security offset riders. Some riders may add to the cost of your policy, so speak with a licensed expert to make sure you have the features that will fit your needs while not being extraneous or making your policy unaffordable.

Additional Things To Consider

Lastly, its important to remember that Social Security has a wide-ranging definition of whats considered income. While many private benefit programs are not considered part of that, there are other things like outside assets, investments, and more that could affect your ability to qualify for federal assistance.;

If youre considering applying for SSI or SSDI, its potentially worth your time to contact a qualified Social Security claims attorney to ensure that your application has the best possible chance of approval. Schott Law is a trusted source for eastern Washington and Idaho applicants working through these issues. Call 328-5789 to learn more and schedule a free consultation.;

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What Does Disability Insurance Cover

Disability insurance covers injuries and illnesses that limit your ability to do whatâs expected of you at work. Seems pretty straightforward, right? Well, there are still many misconceptions about what is considered a disability and what isnât.

For example, what comes to mind when you hear the word “disability”? Often times its freak accidents and rare birth defects. All of those unlikely, tragic events that we believe just can’t happen to us.

But this simply isnât the reality.

More than 25 percent of today’s 20-year-olds will experience a disabling event that prevents them from working for at least three months before retirement. And when you consider the most common causes of long term disabilities, itâs really not all surprising. Take a look for yourself here:

  • Arthritis
  • Heart disease
  • Stroke

Yes, you read that right. The Council for Disability Awareness reports that 90% of claims filed for long term disability benefits stem from medical illnesses, not physical injuries.

To be clear, this doesnât mean injuries such as fractures, sprains, and strains of muscles and ligaments are not disabling. What it does mean though is that the scope of disabilities that can prevent you from earning an income is a lot broader than most people realize.

Best For Rider Options: Mutual Of Omaha

What is the Difference Between a Disability Insurance Lawyer & a Social Security Disability Lawyer?


If youre looking for long-term disability insurance that lets you really customize your policy and keep coverage for as long as possible, Mutual of Omaha may have what you need. They are our top choice for best policy rider options, allowing you to choose between features like future insurability, critical illness coverage, and return of premium, to name a few.

  • Up to $12,000 per month in benefits

  • Premiums stay level through age 67

  • Many built-in policy benefits

  • Multiple additional riders to choose from

  • Shortest elimination period is 60 days

  • Coverage can be continued through age 70, but premiums will increase

  • Quotes not available online

  • Policies must be purchased through an agent

Providing insurance coverage since 1909, Mutual of Omaha has become a trusted name throughout the United States. They hold an A+ financial strength rating from AM Best and are a Fortune 500 company with nearly 12 million members.

With this long-term policy, youll enjoy a plethora of built-in benefits that include total presumptive disability, waiver of premium, recurrent disability, transplant donor benefits, rehabilitation benefits, and a survivor benefit. If you want or need more, you can also add a critical illness rider, future insurability option, accidental medical expense benefits rider, or return of premium benefits rider, thus earning Mutual of Omaha our nod as best for rider options.

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Common Riders To Consider Adding To Your Policy

Individual disability insurance policies often include optional features called riders that can be added to enhance coverage. Riders help customize a policy to fit your needs and preferences. Keep in mind that riders typically add to the cost of your policy.

Here are the most common riders people consider adding:

A residual disability rider provides benefits if you are able to perform some, but not all, of your job following a disability. It also applies if you have to work less because of your disability. Benefits are typically calculated as a percentage of your loss of earnings or of what you would receive if you were unable to work.

A future increase rider enables you to increase your coverage amount at designated future dates. This may occur at certain ages, after major life events, if your income increases or if you lose group coverage. You wonât have to go through underwriting to increase your benefits.

A cost-of-living adjustment will increase your benefit amount to offset the impact of inflation. If youâre disabled and receiving policy benefits, your amount will increase each year that you are disabled.

A catastrophic disability rider can help pay for the care needed due to an extreme injury or illness. This can apply if you suffer a complete loss of one of your senses:

  • Speech
  • Use of both feet
  • Use of one hand and one foot

How Social Security Disability Insurance Can Be Superior To Long

If you become disabled, we recommend applying for Social Security disability insurance benefits even if youâre already eligible to receive private long-term disability insurance benefits. Since SSDI doesnât cost you anything, you lose nothing by applying except the time it takes you get approved.

Social Security disability insurance also comes with an amazing advantage if you need health care. After 24 months of receiving SSDI benefits, regardless of your age, you become eligible to receive Medicare, the U.S. governmentâs single-payer health care program that is usually only open to retirees. Medicare allows recipients to receive health care at a heavily subsidized and reduced cost or for no cost at all.

If youâre disabled, you can also claim Social Security disability benefits for your children. As long as your child is unmarried, younger than age 18 , or younger than 22 but also disabled, he or she can receive benefits from the Social Security Administration. The Social Security disability benefits that a child can receive are calculated as a percentage of the parentsâ disability benefit, up to a family maximum payment of between 150% and 180% of the parentsâ full benefit amount.

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Social Security Disability Insurance Vs Long

Social Security disability is technically an option for long-term disability benefits, but you should know that the application can take up to a year to be approved, and 61% of people are denied at the first round. Also of note: the average monthly benefit just over $1,000. If thatâs not enough for you to live on , youâll need another option.

Read more about Social Security disability insurance.

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