Disability insurance is an essential type of coverage that provides financial protection in the event that you become unable to work due to illness or injury. However, understanding the various terms and features of disability insurance policies can be confusing and overwhelming, making it difficult to choose the right policy for your needs. In this blog post, we'll review some of the most important disability insurance terms that you need to know to make an informed decision when purchasing disability insurance. Whether you're shopping for a new policy or looking to understand your current coverage better, this guide will help you navigate the world of disability insurance and make the best decisions for your financial security.
Own-Occupation:
Own Occupation is a type of disability insurance coverage that provides benefits to an individual who becomes disabled and is unable to perform the duties of their specific occupation or job, even if they are able to work in a different occupation or job.
Under Own Occupation disability insurance, the policy will typically define the individual's specific occupation or job at the time of application, and the benefits will be paid if the individual is unable to perform the duties of that occupation, even if they can work in a different field. This means that if you become disabled and are unable to perform the duties of your current occupation, you can receive benefits even if you are able to work in a different occupation or job.
For example, suppose that you are a surgeon and you become disabled due to an injury that prevents you from performing surgery. With Own Occupation disability insurance, you could receive benefits even if you are able to work in a different field, such as teaching or consulting, as long as you are unable to perform the duties of your specific occupation as a surgeon.
Benefit Period:
The benefit period is the length of time that disability insurance benefits will be paid to an insured individual who becomes disabled and is unable to work. This period is defined in the insurance policy and can vary depending on the terms of the policy.
The benefit period typically begins at the end of the elimination period, which is the waiting period that an insured individual must satisfy before receiving disability benefits. The length of the benefit period can range from a few years to the rest of the insured individual's life, depending on the policy.
Elimination Period:
Also known as a waiting period, is the period of time that an insured individual must wait after becoming disabled before they can start receiving disability insurance benefits. This waiting period is specified in the insurance policy and can range from a few days to several months, depending on the terms of the policy.
The elimination period is designed to prevent individuals from making small or temporary claims, which can help keep premiums lower for everyone. During the elimination period, the insured individual is responsible for their own expenses, such as medical bills and living expenses, until the elimination period is over, and the insurance benefits begin.
It's important to note that the length of the elimination period can impact the cost of the policy. Typically, longer elimination periods result in lower premiums, while shorter elimination periods result in higher premiums. When choosing an elimination period, it's important to consider your financial situation and the length of time you could manage without income, as well as the impact of the elimination period on the cost of the policy.
Non-Cancellable and Guaranteed Renewable:
Non-Cancellable and Guaranteed Renewable are two important features of disability insurance policies that provide significant protection to the policyholder.
A Non-Cancellable policy means that the insurance company cannot cancel the policy or make any changes to the policy terms, including the premiums, as long as the policyholder continues to pay the premiums on time. This means that the policyholder has guaranteed coverage for the life of the policy, and the insurance company cannot change the terms or cancel the policy, even if the policyholder develops a medical condition or becomes disabled.
A Guaranteed Renewable policy means that the insurance company cannot cancel the policy or make any changes to the policy terms, except for premium adjustments that apply to all policies of that type. This means that the policyholder has guaranteed coverage for the life of the policy, but the insurance company has the right to adjust the premium rates for all policies of that type, based on factors such as changes in claims experience or the cost of providing coverage.
Disability insurance is a crucial form of protection that can provide financial security. By familiarizing yourself with the terms we've reviewed in this blog post, you can better navigate the complexities of disability insurance and select the policy that best meets your needs. Remember, disability insurance is an investment in your future, and taking the time to understand the details of your coverage can provide valuable peace of mind for years to come. Come back for the last post in May to review key Disability insurance riders.
Interested in having your current policy reviewed or getting a disability insurance quote? Don’t hesitate to reach out for assistance. We are happy to assist you with this process.
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Talk soon,
Chris