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Insurance - Head Matters


7. Disability Insurance 

Disability Insurance is insurance that pays benefits in the event that you no longer are able to work.  There are two very different definitions of disability used in disability insurance policies.

Definitions of disability used by insurance policies:

  1. The first definition defines a disability as a condition that prevents you from performing the major duties of your occupation. The important distinction here is that even if you are able to do some other kind of work, you will receive your benefits if you are not able to perform the duties of your previous occupation.
  2. The other, less-favorable, definition of disability states that you are disabled if you can’t work at any occupation. This kind of policy may say that if your income goes down as a result of a disability the insurance company will pay a partial benefit.

Pay attention to whether or not the policy continues to pay only until you are able to return to your usual work schedule and duties—or if you'll keep receiving benefits until your income returns to at least 80% of the level it was prior to the disability. 

Here’s a checklist for comparing disability income policies:

  • What is the policy’s definition of total disability?
  • What is the amount of total-disability benefits and when and how often are they paid?
  • What is the elimination period?
  • For how long will the insurance company pay the disability benefits?
  • Are partial-disabilities covered? What is the definition of partial-disability and what period of total disability is required before benefits are paid?
  • Are enduring disability benefits covered?  What is the benefit amount?  How long are they payable? Is a prior period of total disability required?
  • What is the premium—the amount that you’ll have to pay each month or year to maintain the insurance?
  • Are cost of living increases included?                             
  • Can the policy be renewed? What is involved in renewing the policy?
  • Is there a waiver of premium provision?
  • Is there a return-of-premium option—would your premiums be returned to you if you do not file a claim?
  • Does the policy contain riders? If yes, what do they cover and is there an additional premium for their use?
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