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What are
the types of disability insurance?
There are two types of disability policies: Short-Term Disability
(STD) and Long-Term Disability (LTD):
-
Short-Term
Disability policies (STD)
have a waiting period of 0 to 15 days with a maximum benefit
period often of no longer than 17 weeks.
-
Long-Term
Disability policies (LTD)
have a waiting period of several weeks to several months with a
maximum benefit period ranging from a few years to age 65.
Disability policies have two different protection features that are
important to understand.
-
Non-Cancellable
means the policy cannot be cancelled by the insurance company,
except for non-payment of premiums. This gives you the right to
renew the policy every year without an increase in the premium
or a reduction in benefits.
-
Guaranteed
renewable
gives you the right to renew the policy with the same benefits
and not have the policy cancelled by the company. However, your
insurer has the right to increase your premiums as long as it
does so for all other policyholders in the same rating class as
you.
In
addition to the traditional disability policies, there are several
options you should consider when purchasing a policy:
-
Additional
purchase options
Your insurance company gives you the right to buy additional
insurance at a later time.
-
Coordination
of benefits
The amount of benefits you receive from your insurance company
is dependent on other benefits you receive because of your
disability. Your policy specifies a target amount you will
receive from all the policies combined, so this policy will make
up the difference not paid by other policies.
-
Cost of
living adjustment (COLA)
The COLA increases your disability benefits over time based on
the increased cost of living measured by the Consumer Price
Index. You will pay a higher premium if you select the COLA.
-
Residual or
partial disability rider
This provision allows you to return to work part-time, collect
part of your salary and receive a partial disability payment if
you are still partially disabled.
-
Return of
premium
This provision requires the insurance company to refund part of
your premium if no claims are made for a specific period of time
declared in the policy.
-
Waiver of
premium provision
This clause means that you do not have to pay premiums on the
policy after you’re disabled for 90 days.
How can I insure against loss of income?
How can I
purchase disability insurance?
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