Disability Income

One major risk that one has to face in their lifetime is the possibility that they will become totally disabled and be unable to maintain a job for a period of time.  “Statistics show that there is a 50% chance of a 25-year old being disabled for more than 90 days prior to age 65.  It is far less likely that the same 25-year-old will suffer a premature death prior to age 65.”(e. g. Tennessee Health)

For most people who are unable to go to work, employment income would end after a brief period of time.  Because of this, most people would be forced to empty savings accounts to pay normal living expenses such as food, rent and utilities.  One should ask oneself, how long he or she could survive without any income.

Disability income insurance is created to replace lost income in the event of this contingency, and is an important part of a comprehensive insurance program.  It may be purchased individually or through ones job, or company,  on a group basis.

“Presumptive Disability is a provision that is found in most disability income policies which specifies the conditions that will automatically qualify the insured for full disability benefits.”(e. g. Tennessee Health)  Some disability policies provide a compensation when people simply meet certain qualifications, even if they can still do some job duties.  “The presumptive disability benefit provides a benefit for dismemberment (the loss of use of any two limbs), total and permanent blindness, or loss of speech or hearing.  Some policies require actual severance of limbs rather than loss of use.

Recurrent Disability is generally expressed in a policy provision that specifies the period of time (usually within 3-6 months), during which the recurrence of an injury or illness will be considered as a continuation of a prior period of disability.”(e. g. Tennessee Health)  The significance of this feature is that recurrence of a disabling condition will not be regarded as a new period of disability so that the insured is not subjected to another elimination period.

Elimination Period is a waiting period that is imposed on the insured from the beginning of disability until benefit payment commence,  It is a deductible measured in days, instead of dollars.  The reason for the elimination period is to eliminate coverage for short-term disabilities in which the insured will be able to return to work in a relatively short period of time.  “The elimination periods found in most policies range from 30 days to 180 days.  Just as a higher deductible amount results in lower premiums for medical expense insurance, a longer elimination period translates into a lower premium for disability income insurance.  An important consideration in selecting the elimination period, is that payments are made in arrears.  Therefore, if the insured selects a 90-day, but payments will not begin until the following disability in selecting the duration of the elimination period.” (e. g. Tennessee Health)