Comparing Disability Insurance Quotes
What To Look For...
by Larry Laskin

So you are shopping for disability insurance. But it seems so confusing when you are trying to compare the proposals between the different companies. What should you look for?

The most important thing is the definition of disability. After all, this is what determines whether or not you are able to collect benefits. For professionals and most white collar workers, you should look for what is called a “true own-occupation” definition of disability. This means that if due to injury or sickness you can not perform the substantial and material duties of your regular occupation, you can collect benefits if you are at work in another occupation. A couple of companies such as Guardian go a bit further for physicians. They have medical specialty language in the definition of total disability. This means that if a doctor who has limited his or her occupation to a single medical specialty can not work in his or her specialty due to a disability, he or she can collect benefits if he or she is working as another type of physician. For blue-collar workers, look for a policy that has a modified own-occupation definition of disability. This means that you can collect benefits if you can not perform the substantial and material duties of your occupation and are not working in another occupation due to a disability. Most companies offer a two-year modified own-occupation definition of disability for blue-collar workers. This means that for the first two years, you get the modified own-occupation definition. After two-years, you can only collect if you can not work in any occupation based on training, education or experience.

Another thing to look for is whether or not the policy is non-cancellable and guaranteed renewable. If it is both, then the carrier can not cancel your policy except for non payment of premiums (although you can cancel at any time) and that the rates can not be raised until at least age 65. If it is a guaranteed renewable policy only, as many policies are, then the rates can and/or will be raised in the future.

Mental/disorders, stress and anxiety claims are taken very seriously by insurance companies today. Most carriers now limit these types of claims to 24-months, unless you are confined to a hospital. Some companies do not have this limitation and would pay the claim until the end of the benefit period. Even if there is no family history of stress or depression, you never know what might happen in life that may trigger a severe reaction.

The definition of residual, or partial disability is one of the more complicated ones. This rider pays for partial disabilities. Some companies also pay for a recovery benefit under this rider. The way most companies pay a residual claim is that they pay for a proportionate loss of income after satisfying the elimination period. For example, let’s say you are making $100,000 a year and have a monthly benefit of $5,000. If you were in a car accident and could only work part-time and were only making half of what you were before you were disabled, the company would pay $2,500 (half of your monthly benefit). Most companies require a loss of income of at least 20% to collect benefits, but some only require a loss of 15% to begin collecting. Under the recovery benefit, if you return to work full-time after a period of disability, but are earning less than 80% or 85% of what you were before you were disabled, then you will collect some or all of your monthly benefit until you get back to almost what you were making before you were disabled. This is especially important for sales professionals, others who earn commissions or bonuses and self-employed individuals. It could take a substantial length of time for your income to get back to pre-disability levels. Look for a company that offers this benefit for as long as possible. Some companies don’t offer this, while a couple offer a residual disability benefit for the entire benefit period.

Disability insurance is probably the most important insurance product you can own. After all, most people’s biggest asset is their ability to work. Don’t shop by price alone. With disability insurance, you get what you pay for.