Most people would agree that they work very hard for their money. Even more people would agree that their motivation for working hard is to support and provide the best life style possible for their family. Whether you are a doctor, engineer, nurse, teacher, plumber or a truck driver you should have Disability insurance as a means of protecting the hard work you've put toward providing for yourself, your family and your future.
If you do not already know, Disability insurance is a product used to protect a person's ability to work and earn an income. If you are unable to work due to an illness or injury, Disability insurance will provide you with a monthly benefit to replace a percentage of your normal income. The amount of disability benefit you can obtain is directly impacted by your actual earnings. Most professionals are able to insure up to around 60% of their annual income, however higher earners will be capped at approximately 50-55%.
Disability insurance can be obtained in 3 different ways: through an employer, a professional association or on an individual basis. Individual coverage that is purchased directly from an insurance company through a broker or agent will provide the most comprehensive protection available today. It is more expensive than coverage provided through a group or association, but it will also pay out higher claims and in more claims scenarios than group or association coverage will.
The provisions of an individual Disability insurance policy will be much more favorable than those in a group or association policy. Three of the biggest concerns are: the definition of disability, mental/nervous benefit limitations and benefit offsets.
Individual Disability insurance allows you to maintain an Own-Occupation definition of disability through the entire benefit period of the contract. Group and association coverage however, will often change to an Any-Occupation definition after 2 or 3 years of being on claim. Essentially this means that instead of protecting your specific occupation, you may be required to work elsewhere in a different occupation if you are able.
Depending on the insurance company you work with, an individual Disability insurance policy will allow you to receive benefits for Mental and/or Nervous conditions throughout the entire policy benefit period. Group and association Disability insurance however will commonly limit the available benefit period for Mental and/or Nervous conditions to 2 years. Although this is a condition that most people cannot imagine ever experiencing, it is one of the leading causes of claims. If you can avoid it, you do not want to limit your benefits for Mental/Nervous conditions.
The final concern is that Group and Association Disability insurance benefits will often be off-settable by Social Security benefits. This means that if you were eligible for Social Security Disability benefits, your Group or Association Disability benefit would reduce dollar-for-dollar with any and all benefits you receive from Social Security. Although it is very difficult to qualify for Social Security benefits, if you do qualify, your situation will likely be bad enough that you will not want to deal with a reduction in benefits of any sort. Most individual Disability insurance will not offset benefits with those received from Social Security. Even those policies that do have off-settable benefits will have limits on how much can be offset.
Although the premiums may be higher for individual Disability insurance, in the situation of an actual claim, you will realize that Group and Association coverage ends up costing more, because it does not end up paying as much as individual coverage does. Before making your decision to buy Group or Association coverage, speak with a specialist. Most brokers or agents would be happy to compare the benefits of a Group or Association plan with that of an individual policy. The differences are significant, and you will likely realize that individual Disability insurance is the better option.
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