Disability: It Can Happen. Be Prepared. Part 1
At 31 years old, you don’t expect the cause of your cough to be a thoracic liposarcoma. In fact, most 31 year olds don’t think that much about being sick or visiting the doctor. Careers are blossoming, families are being planned, and travels are being anticipated. Dinner party conversations never veer to discussions of disability or life insurance.
Meet Dr. Alicia Snell, an amazing emergency veterinarian who worked her way through the nausea, fatigue, and pain that comes along with cancer treatments because she didn’t have any other choice. She had health insurance, but no disability coverage to help pay for life’s necessities while she underwent extensive care.
Support and creativity were required to make sure bills were paid. Family, friends, and colleagues chipped in to help via a fundraising site and student loans were deferred. Since her medical team was across the state from where she lived, Alicia’s aunt and uncle would take her “glamping” in their RV to save on lodging costs while she underwent treatment.
Today, Alicia is cancer free and does have disability insurance proving that a pre-existing condition will not exclude you from this type of coverage.
In the first of a two part series on disability insurance, JC Mitchell, Regional Sales Director with Vetinsure, provides us with some key questions to consider when choosing disability insurance.
Q. What is disability income insurance?
A. You can think of disability income insurance as insurance for your paycheck. It allows you to protect your most valuable asset—your income—in the event you become too sick or hurt to work. If you suddenly lost your ability to work and earn a living due to a sickness or injury, how would it impact your life? 55% would need to borrow to cover a $5,000 financial emergency. The chances of it happening are greater than you think. Statistically, you have a 1 in 4 chance of being disabled for 3 months or more. And, you have a 1 in 8 chance of being disabled for 5 years or more. The most common causes of a disability are not accident or injury, but actually illness. 90% of disabilities are related to illness. Less dramatic and much more common than an accident, illnesses like cancer, heart disease, or diabetes cause the majority of long-term disabilities. You just never know when or how it might happen. Protecting your ability to earn an income should be the foundation of any insurance planning.
Not all long-term disability policies are created equal. You’ve invested a lot of time and money into your career, protecting your ability to perform your own occupations specifically is critical. In some instances, you could become disabled and unable to do perform the specific duties in your occupation, but you may be able to work in a different occupation. Make sure your policy does not stop paying you if you decide to do something else.
Q. What does “disabled” mean in terms of disability insurance?
A. The definition of disability varies from one insurance company to the next. You will want to avoid any language that limits your options.
Q. When do the monthly benefits begin?
A. You can choose an elimination period from 30, 60, 90 days for shorter benefit periods. For longer benefit periods, you may choose 90, 180, or even 365 days. The shorter the elimination period, the higher the cost.
Q. How long do the monthly benefits continue?
A. While there are options of 2, 5, & 10 years, it is customary to select a plan that pays to retirement age, 65 or 67; protecting the years you intend to earn an income. The longer the benefit period is, the more it will cost.
Q. How much coverage can I buy?
A. Generally speaking, you can buy up to about 60% to 65%of your income. Benefits are typically received income tax free.
Q. Does the policy premium go up over time?
A. You should ask for a policy that has a level premium Non-Can and Guaranteed Renewable Policy. A Non-Can Guaranteed Renewable policy can only be canceled for non- payment of premiums. A Guaranteed Renewable policy is another safe option. The premium could go up, but typically does not.
Q. What if I am not totally disabled?
A. A good policy offers Residual or Partial benefits. Some insurance companies will pay benefits with as little as a 15% loss of earnings due to a disability. I always recommend a residual benefit as most disabilities are proceeded by or followed by a period of partial or residual disability.
Q. Can the insurance company cancel my coverage?
A. Non-payment of premiums. Some association plans will cancel coverage if you leave the association or change occupations. I recommend a policy that is Guaranteed Renewable.
Q. Can I take my policy with me if I hire on somewhere?
A. An individual policy goes wherever you go. Whether you go to work for a clinic or hospital as an associate vet, or you decide to teach, the individual policy will not change. Some group policies are portable, but it is often expensive to convert. Most Association plans cancel if you end your membership or change occupations.
Q. What happens when my income goes up?
A. You should consider a Future Insurability option on your policy if you expect your income to increase over time. This way you only have go through medical underwriting once. In the future when your income goes up, you would only have to show that increase in income.
Q. Where do I get an individual long-term disability policy?
A. Insurance agents & financial advisors who specialize it disability insurance are your best option.
Q. What is the process to get an individual long-term disability policy?
A. Once you have decided on the coverage you want, there is an application and underwriting process. You will most likely complete a 15-20-minute tele-interview call. They will ask you about your health history, life style, and they will ask for your personal physician’s contact information. Verification of income will also be required, you may need to provide a pay-stub or W2, and for owners, you will need to provide your most recent tax return. Depending on the amount of coverage you need, you may also have to do an exam with labs.
Q. What if I am taking a prescription for depression, anxiety, etc.?
A. If you are being treated for, or you are taking a prescription medication for a mental/ nervous disorder, you will most likely receive an offer of coverage that excludes any disability that is a result of such condition. This will depend on the severity of the condition and your overall health history.
Q. Will the policy cover student loans?
A. Yes, there are some insurance companies that will cover your student loan debt.
Obtaining disability coverage does not have to be difficult. An experienced advisor will walk you through the process and advocate for the best offer of coverage from the insurance company to fit your needs. Be sure to give yourself enough time as the process can take a several weeks. Your income is your most valuable asset, make sure you protect it.
JC Mitchell can be reached at: (678) 386-5382 or [email protected]
Stay tuned for Part 2 of this blog post where we’ll discuss key questions to ask of insurance specialists to help you make smart choices when choosing a provider and policy.
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