Disability Insurance Services

Disability Insurance FAQs

Question: How great is the risk of disability? Can DI cover my clients’ mortgage payments?

Answer: The risk of disability is significant. Every year, one person in 105 dies; one home in 88 catches fire; one car in 70 has an accident; and one person in eight suffers disability. Standard STD and LTD benefits only apply to base compensation and are fully taxed, leaving most people seriously underinsured. DI fills the gap and can protect mortgage payments. According to the United States Saving and Loan Association, less than three percent of all mortgage defaults occur because the bread winner dies with inadequate life insurance. Nearly half (48 percent) of defaults occur because the bread winner becomes disabled and has inadequate disability income insurance.

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Question: What is the Own-Occ. definition?

Answer: Own-Occupation (Own-Occ.) is the most important definition when insuring someone in a highly specialized occupation. For example, if a surgeon can no longer perform surgical procedures but can return to work full time as a general practitioner, he still qualifies for full disability benefits under the Own-Occ. provision.

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Question:What determines disability?

Answer: Many companies define disability under the Own-Occ. definition as: "…because of injury or sickness: You are unable to perform the substantial and material duties of Your Regular Occupation; and you are under the care of a Physician appropriate for Your Injury or Sickness."

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Question: What are residual benefits?

Answer: Residual benefits are "partial" benefits. Policies pay residual benefits whenever income is reduced by 20 percent or more due to disability. For example, if a policyholder earned $50,000 annually, was disabled and then returned to work earning $25,000, she would have a 50 percent loss of earnings, and thus qualify for a 50 percent residual benefit.

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Question: What percentage of income can be insured?

Answer: Benefit levels are determined by each carrier’s Issue and Participation Limit. Benefits normally protect 60 to 70 percent of a person’s income. Limits prevent "over-insurance" because benefits are typically tax free. Most companies issue benefits to a maximum cap of $15,000 per month. In cases of highly compensated applicants, this represents a low percentage. However, creative solutions are available and we regularly place coverage for highly compensated individuals of up to 75 percent of compensation, with no monthly limit.

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Question: Which waiting period is right for my clients?

Answer: The waiting period (or elimination period) is the number of days that must elapse between the time of total disability and the time benefit payments begin. Choices range from 60, 90, 180, and 365 days. To determine the best waiting period, ask each client about the type and amount of funds he/she has readily available for income in the event of disability. Another consideration is cost. Polices with shorter elimination periods command higher premiums.

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