Disability Insurance is a complex insurance product. They have many moving parts, and not every policy is the same. Be sure to check and understand it.
While disabled, an individual may receive income from a Disability Insurance policy, tax-free, if the individual has paid 100% of the cost.
The income can cover:
- Income replacement
- Business overhead
Vital things to check:
- Continually update your salary information, to be sure you receive proper coverage.
- Non-Evidence-Maximum (NEM) is the maximum amount that will be paid out in a group plan without being required to provide medical evidence of insurability. Be sure it is enough. Top-ups are available, separately.
- A policy can pay benefits for as long as 2 years, 5 years, or up to age 65. This depends on which options your employer chose. Four months before 65 voids Long Term Disability, as the 120-day elimination period would take you beyond eligible coverage.
- Each plan has an elimination period. An elimination period is the amount of time that must pass during your disability before benefits are payable to you.
- Group = usually 120+ days
- Personal = 30, 60, 90, or 120+ days
While on approved disability, confirm with your employer about the premium waiver.
*The 2-year own-occupation, within a group plan, has one of the better ratings for disability insurance.
If you become disabled, your personal insurance may offer:
- Premium waiver
- Premium holiday – you can use the policy’s value to pay the premiums for a short time
- Whole Life Insurance – an insurance product that can supplement your disability income using the cash values
Policy add-ons, called riders, offer the ability to continue your retirement funding during total disability. Even a few missed deposits can make an impact on your retirement fund. You can also add riders to offer a refund of dollars after a specified number of years (typically 8 years) if you have made no claims. These are dollars that you could add to your investments at a later date.
** It is always good to check all your plans to see if they offer what you think they do.
Have a question? Or need clarification?
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