If you read the fine print for any insurance policy, you will notice a section on exclusions. These are situations that the insurance company does not cover and will not pay a benefit. Disability insurance is no exception, and anybody who owns or is considering purchasing it should be aware of its exclusions. Below are some of the typical disability insurance exclusions found in policies.
Unlike built-in benefits of disability insurance policies, which are provided at no extra cost, riders are optional features that can be added onto a an insurance policy for a price. We’ve talked about some common life insurance and critical illness insurance riders before. Here we want to address some common disability insurance riders, and whether or not you should add them to your policies.
The maximum issue limits for disability insurance is the maximum coverage you can purchase based on your age, occupation class, and income. Disability insurance is designed to replace a portion of your income, up to a maximum amount. By basing the benefit on income and replacing up to a certain amount, disabled individuals do not suffer financial hardship, and at the same time maintain the incentive to return to work.
The disability insurance elimination period, also known as the waiting period, is the period of time that must elapse in a disability before benefits are paid. Benefits begin at the end of the month after you have satisfied the elimination period. For example, a disability insurance policy with a 90 day elimination period will have benefits start after 90 days of disability have passed. Along with the benefit period, the elimination period is the most common option for customizing the premium of your policy.
The disability insurance benefit period is the length of time that benefits will be paid while you are on a disability claim. Benefits begin at the end of the month after you have satisfied the elimination period and will be paid until the end of the benefit period. The most common choices are two years, five years, and to age 65. Note that this is the maximum benefit period for a claim. If the duration of the disability is shorter than the benefit period chosen, then payments will stop when the disability ceases.
Although not as prominent as the main features of disability insurance policies, built-in benefits are nevertheless vital to these policies. They supplement the main features and help enhance the policy. Many built-in benefits form a part of every disability insurance policies, although the definitions may vary among insurance companies. Below is a list of commonly found built-in benefits of disability insurance policies.
The type of duties a person performs and the nature of the industry they are in have a tremendous impact on the risk of disability. For example, an arm or leg injury may only disable an office worker for a week or two, but the same condition could cause a construction worker to be unable to work for a considerable period. Therefore, an insured's occupation class is essential in determining the premium rate for the policy and its available riders.
Because of the non-static nature of mortality and morbidity rates, insurance companies have to revise the premiums offered by their life and disability insurance policies once in awhile. But what about policies which are already in force? Are the premiums for a disability insurance policy guaranteed, even in the face of increased claims? Or can the insurance company make changes to its premium, provisions and riders at the time of renewal?
Last week, we had an in-depth look at the different definitions of total disability and how it affects your claim and the price of a disability policy. But not all injuries or illnesses result in total disability. Sometimes, your ability to perform the duties of your occupation may only be partially hindered. You may not be able to perform some of the tasks, or may only be able to do them for a shorter duration. You may even suffer a loss of income because of your partial disability. Does that mean your disability insurance policy won't pay you any benefits? It depends on the partial disability clause in your policy.
Unlike the relatively straightforward process of qualifying for the death benefit with life insurance, qualification for disability benefits can be difficult to understand. In order to receive benefits from a disability insurance policy, you must meet the definition of disability as outlined in the contract. But what is the definition, how does it affect premiums, and does it vary from one insurance company to another?