By offering long term disability insurance, you can help your clients achieve true financial stability. Comparing long term disability insurance quotes can be complicated, however. You can’t just look at the premium – there are many other clauses that will have a big impact on how the coverage performs.
Here’s an overview of what you should look for when comparing long term disability insurance quotes.
The Elimination Period and the Benefit Period
There are two key periods to consider when reviewing your long term disability insurance options. One is the elimination period. The other is the benefit period.
- The benefit period is the length of time that the policyholder can receive benefits while they are disabled. For example, a benefit period of five years would allow the policyholder to collect benefits for up to five years. Some benefit periods end when the policyholder reaches a certain age, often 65 or 67.
- The elimination period is also called the waiting period. This is the length of time that the policyholder must be disability before being eligible to receive benefits. A typical elimination period is 90 days. This means that the policyholder will be able to receive benefits beginning 90 days after the start of the injury or illness. Some elimination periods may be longer or shorter.
Also look for other clauses that impact the elimination period. One of these clauses is the recurrent disability clause, which will determine whether the elimination period is waved if the policyholder experiences the same disability a second time within a specified period of time. Another clause is the good health benefit, which can reduce the elimination period for every consecutive year the policyholder goes without a claim.
The Benefit Amount and the Future Purchase Option
The benefit amount determines how much the policyholder will receive each month if they experience a covered disability. The benefit amount may be a percentage of the policyholder’s normal income, and it’s often set at 60% of gross income.
It is also important to consider the benefit maximum. If the disability insurance policy has a monthly maximum of $5,000, for example, the policyholder will not receive more than this, regardless of their regular income level. Often found in group products, benefit caps can impact high income earners disproportionately.
A person’s benefit needs will likely change over the years, as their income increases, and they take on more financial obligations. The future purchase option lets the policyholder increase their benefit amount without undergoing medical underwriting. This is a good clause to look for when comparing disability insurance quotes.
Exclusions and Definitions
What counts as a disability? This is an important question to ask when reviewing long term disability insurance quotes. Not every injury or illness will count.
For example, what if a surgeon experiences a hand injury that renders him or her unable to operate? Does this qualify as a disability for the purposes of disability insurance? The answer will depend on the terms of the policy.
A disabling condition may be defined in one of three ways, depending on the policy and the insurance company:
- An own-occupation policy will pay benefits if the policyholder is unable to work in his or her regular occupation due to an injury or illness. This is considered the gold standard for doctors, but it can increase the policy cost, and some workers may not need this level of coverage.
- A modified own-occupation policy is similar, but it adds the stipulation that the policyholder cannot receive benefits if they are employed in another profession.
- An any-occupation policy will pay benefits if the policyholder is unable to work in any occupation that they are suited for. This definition provides less robust coverage, but it can also be more affordable and may be adequate for some workers.
In addition to the definitions above, review the policy for any other exclusions or limitations that could restrict when the policyholder is eligible for benefits after an illness or injury.
Portability and Renewability
Many policyholders will want to renew their disability insurance policy year after year. This is a great way for them to achieve continuous income protection. It’s also a great way for you to earn additional commissions. But watch out – the policy language determines each policy’s renewability.
Some policies are non-cancelable and offer guaranteed renewability. This means that the insurer cannot change the premium or benefits once the policy is in force and until the policyholder turns 65 – even if the policyholder’s situation changes. These are great terms, but not all policies are written this way. Some policies, especially group and association plans, are only conditionally renewable. Some policies are also cancelable, meaning the carrier can change the terms or cancel the policy. When comparing disability insurance quotes, check for these terms.
Individual disability insurance policies are portable, meaning the policyholder can keep the policy when changing jobs. However, group or association policies usually are not portable.
Riders That Personalize Coverage
With the addition of the right riders, you can personalize coverage to match your client’s needs. The options may vary from one insurance company to another.
We’ve already mentioned a few clauses to look out for, including the future purchase option, the recurrent disability clause and the good health benefit.
Here are some other riders to consider when getting disability insurance quotes:
- The Cost-of-Living Adjustment (COLA) Rider: Let’s say a client can make do with $4,000 a month now. Will $4,000 a month still be sufficient 10 years from now? Inflation means that a dollar loses buying power over time. A COLA rider provides annual benefit increases to make up for inflation.
- Family Care Rider: Disability insurance can help prevent a financial disaster if the policyholder is unable to work because of an injury or illness – but what if the policyholder isn’t the one with the disability? Many people are forced out of the workforce because they need to provide care for a family member. The family care rider provides benefits in this situation.
- Catastrophic Benefit: A severe disability may do more than prevent someone from working. It may also make the person unable to perform activities of daily living, and this can necessitate expensive care. The catastrophic, or CAT, rider pays additional benefits if the policyholder meets the policy requirements.
- Non-disability Injury Benefit: Even conditions that aren’t disabling can be expensive. This rider provides benefits, often up to half of the monthly benefit, to cover medical treatment.
Want to learn more about disability insurance coverage? Check out the Disability Insurance Crash Course. For quick, quality long-term disability insurance quotes, click here. Put the DIS Analyzer to work comparing the best options for your clients.