Accident Disability Insurance Benefit
Sun Life’s accident insurance plans – Essential and Preferred – include an optionalAccident Disability Insurance Benefit. Injured employees and spouses can count on a weekly stream of income if they become Totally Disabled as a result of a covered accident. Disability for spouses is defined as the inability to perform two or more Activities of Daily Living.
Once You Understand The Kind Of Coverage You Have In Place And Coverage That You May Want You’ll Be In A Better Position To Make An Informed Choice About Whether Or Not To Add To Your Existing Coverage
You need your pay cheque to pay your bills, do your extra-curricular activities, eat and so much more, so what happens if you suddenly become sick or injured and cant work? If youre a full-time employee, your benefits plan may provide some financial protection, in the form of disability insurance. You could even call disability insurance Income replacement insurance because it replaces some of your income if you get sick or injured and cannot work.
But is the coverage you have at work sufficient to meet your needs? Well break down disability insurance coverage thats provided as part of employee benefits, and guide you through how to figure out whether your workplace plan fits your needs.
Disability insurance 101: Understanding the basics
Many people have short-term or long-term disability insurance coverage, or both, through group insurance provided by an employer.
This is an important benefit, as the occurrence of disabilities in Canada might be greater than you think. In 2017, 22 percent of the Canadian population aged 15 years and over or about 6.2 million people had one or more disabilities.
*these numbers are based on disability insurance claims received by RBC Life Insurance Company® between 2014 and 2017.
1. How does my disability insurance policy protect my monthly income?
The details of how your insurance coverage protects your income will be set out directly in the policy. Reviewing the policy will tell you:
When An Insured Purchased Her Disability Income Policy She Misstated Her Age To The Agent She Told The Agent That
When an insured purchased her disability income policy, she misstated her age to the agent. She told the agent that she was 30 years old, when in fact, she was 37. If the policy contains the optional misstatement of age provision
1. The elimination period will be extended 6 months for each year of age misstatement.2. Because the misstatement occurred more than 2 years ago, it has no effect.3. Amounts payable under the policy will reflect the insureds correct age.4. The contract will be deemed void because of the misstatement of age.
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Thinking They Dont Need Disability Insurance
Many doctors, especially young doctors, think that theyll never become disabled. Studies show, however, that doctors have a 20-30% chance of being disabled over the course of their careers, a much higher chance than those in other white-collar professions.
In addition, the financial impact of not having your income protected can be life-altering. A recent study showed that 42% of people diagnosed with cancer end up depleting all of their life savings, even when they had health insurance.
A huge reason they had to exhaust their savings was due to being out of work for long periods of time and not having an income source.
The best way to protect your assets from the financial effects of a chronic illness or injury is long-term disability insurance. Since your career income is far and away your largest financial asset, protecting it is a no-brainer.
If youd insure a $30,000 car or a $400,000 house, you should insure your $5 million career income.
Violations Of Standard Insurance Models In Health Care
Health insurance violates several of the just cited core principles of standard insurance models. For example, unlike the events insured against by homeowners or automobile owners, health plans today frequently cover care for events that are clearly anticipated and even planned, such as pregnancy, childbirth, and vaccinations. Such practices can be explained, in part, by the view of public and private decision makers that insurance coverage is a reasonable vehicle to encourage the timely use of services that promote individual and public health.
Of greater relevance for this report is that insurance for much of the care used or needed by Americans who have serious chronic health conditions or disabilities does not fit the standard insurance model well. Certainly, some individuals with disabilitiesfor example, healthy young adults who have low vision or hearingare not predictably high users of health care services. Nonetheless, for many people with disabilities or serious chronic illness, their future use of services is often fairly predictable. Individuals with progressive mobility impairments may, for instance, know or expect that they will soon need a wheelchair or some other assistive device. Similarly, people with certain disabling heart conditions know that they need ongoing drug therapy. As shown in , per person spending is substantially higher for people with serious disabilities than for others.
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Health Insurance Markets And Their Limits For People With Disabilities
Health insurance protects individuals and families from high health care costs. It has also become a positive means to encourage the timely use of beneficial health care services, in particular, relatively low-cost preventive services. The discussion below touches on only a few of the issues that are relevant to health insurance for people with disabilities. The focus is on certain aspects of health insurance markets that create difficulties for this population.
Disability Insurance Protection For Retirement Plan Contributions
Group and individually owned disability insurance plans traditionally are designed only to replace a portion of the insureds current income, not to replace monthly contributions into company or individual defined contribution retirement plans. Nevertheless, a few disability insurers have developed programs designed specifically to replace lost retirement savings when you become disabled.
Retirement protection disability insurance helps you continue saving for retirement in the event of a disability. If you become disabled, the policy pays a benefit in the amount of your retirement plans monthly contribution into a trust specifically for the insureds benefit. The money in the trust is invested at your discretion until you reach age 65 and then distributed to help supplement retirement income. These policies typically offer monthly benefits up to $3,800and can be added to existing coverage .
Policy benefits and trust earnings are subject to the normal rules that govern the taxation of trusts and individual disability income insurance. Trust earnings are generally taxable to the insured as the beneficiary of the trust.
Related AMA Resources
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How To Get Employer
Many companies offer short- and/or long-term disability insurance as part of employee benefits packages. Like other benefits, you can sign up during open enrollment periods. Depending on your employer, your company may subsidize some or all of your premiums.
Group disability policies are an affordable way to get some disability coverage, but there are caveats:
If your employer covers part of your premiums, your benefit payments may be partially or fully taxable.
The types or amount of coverage you can buy may not provide all of the protection you need.
You usually arenât able to keep your policy when you leave your job.
Unless you wouldnât qualify for private disability insurance, itâs best to use group coverage to supplement a private policy.
No matter which type of disability insurance you buy, the process for securing coverage is relatively simple. Get a sense of how much coverage you need and the policy benefits that matter to you before you shop, and compare quotes to ensure you get the right policy at the best price.
Thinking Employer Coverage Is Enough
Disability insurance through your employer is just not enough on its own! ;Most doctors dont realize this but their employers coverage is not true own-occupation coverage and the benefit is most often taxed before you ever receive it. ;
This means that if you get disabled and think your employer will cover 60% of your income, it may end up only paying you between 25%-40% of your attending income after taxes and other deductions are made.
On top of this, coverage from your employer is not portable in most cases. This means you could end up in a position of not being able to protect your income in the future if you change jobs to an employer that doesnt provide a disability benefit or if your health has changed to where you cant get the coverage on your own.
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How Much Money Is Paid By My Long
The money that is paid is called a benefit. The benefit amount varies from policy to policy, but typically it is paid monthly in arrears, and is equivalent to a percentage of your pre-disability income. The percentage also varies from policy to policy, but can range from 50% to 70% of your gross earnings. Some policies also factor in bonuses and overtime when calculating the benefit amount. Additionally, some policies may have a monthly maximum, particularly in the case of high-income earners. If your LTD policy has a; adjustment clauses, then the monthly benefit will increase each year. Some LTD insurance policies provide a set monthly amount, rather than percentage of income, as the LTD benefit.
What Would You Do If You Lost The Ability To Earn An Income And Provide For Your Family
Disability Insurance protects your most valuable asset, your ability to earn an income. A long-term disability could suspend or terminate your income for an extended period of time. It may force you to close your business.;Disability Insurance;provides a source of income in the event of a disability.
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Introduction To Life Insurance And Annuities
If you are planning to purchase a life insurance policy or an annuity contract, you should first consider your needs and understand the different type of insurance products that are available.; Many more consumers are using life and annuity products as part of their financial planning goals.; Consumers spend substantial sums of money each year on life insurance policies or annuity contracts knowing very little about what it is that they are getting.; This guide was developed to help consumers make educated decisions and to help them understand both the benefits and the risks involved in financial planning.
Not Using An Independent Insurance Broker
When I was in the 8th grade, I had both of my parents for teachers. They tried so hard to avoid the perception of favoritism, but of course they were partial to methey were my parents, after all!
I always think about that when I hear about doctors trusting an insurance agent who is employed by a single company to be unbiased.
Even if they have the best intentions to be impartial, if their office is paid for by one company and their bonuses are linked to selling policies from that company, they can only be dispassionate to a certain degree.
Your best bet is to find an independent insurance broker who is not employed by any of the companies that they help you research.
One trick is to ask them how much of their business is placed each year with each company and why? Youll learn a lot if they are honest with you!
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Access To Health Insurance And The Role Of Risk
I have to go down my list of medications and choose which pills I can take and which ones I cant. Some months, I have a little extra money and I can take it, and other months I cant. Ive just been picking and choosing. I havent done myself any favors by doing that, but you have to do what youve got to do.
Maggie Quoted by
Maggie had to make decisions about which medications to take and which to forego, which is a dangerous dilemma. In her case, these hard choices are necessary because she has just started receiving Social Security Disability Insurance benefits but will not become eligible for Medicare for 2 more years. In the interim, she has no health insurance. For others, the complexities of the Medicare prescription drug program or the state-federal Medicaid program can lead to interruptions in access to services or medications as program rules change or individual circumstances fluctuate. Yet others lose coverage when they lose their job or their employer stops offering health insurance. Although people with disabilities are somewhat more likely than other people to have insurance , the consequences of a lack of insurance can be more severe for them because they often have more needs for health care .
The Life Insurance Company And The Policy Owner Have Lost Track Of Each Other
The main mode of contact between you and financial institutions is by snail mail. As with anyone with whom you wish to keep in contact after you move, you must tell them your new mailing address or they will lose track of you. The U.S. Post Office will only forward first-class mail for a year to a forwarding address, and the sender is not aware that the mail is being forwarded to a new address as the Post Office does not inform the financial institution of the change.
If you move, immediately inform every financial institution directly of your new mailing address, including your life insurer.
Of course, the same principle applies to other forms of communication: tell the life insurance company of new phone numbers , email address, etc.
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Regular Or Own Occupation
The definition of “regular or own occupation” plan means you’ll receive benefits if you’re unable to perform the main duties of the job you had at the time the disability started.
You’ll still receive benefits even if you can work in a different job from the one you had before your disability, based on your training, experience and education. Some policies don’t allow you to get benefits, or may reduce your benefits, if you begin working in a different job.
In group policies, it’s common that policies have regular or own occupation plans for a specified period of time. At the end of the specified period of time, usually after the first 2 or 5 years, the disability policy will often change to the any occupation definition.
Own occupation plans that never change in definition are often purchased individually and usually cost more than any occupation plans.
You may want to consider an own occupation plan if you have a specialized occupation that would require you to take a significant pay cut in order to work in another field.
The Life Insurance Company Doesn’t Know The Insured Has Died
Life insurance companies typically do not know when a policyholder dies until they are informed of his or her death, usually by the policys beneficiary. Even if a policy is in a premium-paying stage and the payments stop, the insurance company has no reason to assume that the insured has died.
Moreover, there are policies that have benefits called cash values, with an Automatic Premium Loan feature. An APL policy borrows money from the cash value to pay a premium due if the money does not come in by the end of the grace period; thus preventing an unintended lapse of the policy, which would have the disastrous effect of loss of the entire death benefit should the insured die after premiums due were not paid. Under an APL, the policy would continue in full force until all of the cash value had been borrowed, at which time it would lapse.
Also, many policies are in a stage in which no premiums are due. Some life insurance is bought with a single premium or a small number of premiums due , but the insured might live a long time after the premium payments end. Thus the life insurance company would stop sending premium notices after all premiums were paid.
Remember to provide your beneficiaries with the name and contact information for your life insurance company, so they can report your death and file a claim.
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Beneficiaries Don’t Know That A Life Insurance Policy Exists Under Which They Are Beneficiaries
It may come as a surprise, but sometimes beneficiaries do not know that they are covered by the insureds individual or group life insurance policy. The insured may have a variety of reasons for keeping this information secret from the beneficiaries, but an unfortunate consequence is that the benefits could end up unclaimed because no one actually realized that they could make a claim. I
Tell the beneficiaries of your life insurance that when you die they will be entitled to death benefits. And provide them with the name and location of the life insurance company as well as the policy number.
Gather Necessary Information And Documents
Speed up your application process by gathering personal information such as:
Financial documentation like bank account details, paystubs, and tax returns
Medical details, including records and any doctors or clinics you see regularly
Occupational information, including your income and benefits plan
Proof of citizenship and Social Security number
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