Individual Disability Insurance FAQ's

What is long term disability income insurance?
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Not to be confused with Long Term Care Insurance, or Social Security Disability, private disability insurance is simply a policy you purchase while you are in good health that allows you to continue to receive an income if you should become unable to perform your regular job. You may be able to get funds to help retrain for something you are able to do. The income will not match your lost income, but will be a percentage—usually up to 60 or 80%. Since it is tax free, it will often be close to your actual take home pay.

I have a disability waiver on my life insurance? Won't that do the job?

NO. The disability waiver only pays the premium on your life insurance if you become disabled.

I have good health insurance. Do I still need disability insurance?

Yes. Medical insurance pays your doctor and hospital bills. It doesn't provide you with an income—a way to pay the mortgage and put food on the table—if you can't work.

What will the premium be?
The quote you are offered will depend on the level of coverage you choose and on your age.

Why shouldn't I just rely on Social Security?

Social Security disability is very difficult to get. There is a built in four part appeals process, and often even the most obviously disabled are forced to go through all four appeals—taking two years or more—before disability is granted. Total disability is usually required; thus if you can work part time, you will be disqualified.

Who decides if I am disabled "enough" to collect?

That will depend on the terms of your policy. The better companies specify that you must be unable to do your regular job. Some policies will not pay if you are able to work part time or if you are able to do a different job. You must examine this part carefully.

What is a waiting period or a waiver of premium?

The waiting period is like a deductible, except that it is a time period. If you can save up some money to get you through a month or two before needing to collect your benefits, you will save money on your premium. Some companies have an automatic minimum waiting period during which they will not pay. Most companies waive your premium once you have been on claim for 90 days. Some will even pay back the premium you paid during the first couple of months that you were on claim.

How long will payments last?

In most cases, payments will continue until you are able to take another job or until you begin collecting social security.

How long will the policy itself last?

Most disability plans usually end at age 65. Some companies offer you a return of premium rider—allowing you to collect a refund on your premium if you never had to use the policy—while others will give you an automatic conversion to Long Term Care Insurance with no health underwriting. The latter is probably the better option, but the choice is up to you.

If I am able to return to work, but become disabled again in the future, will I be able to collect a second time?

Yes, providing your policy has a guaranteed renewability clause.