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Archive for the ‘Disability Insurance’ Category

The main purpose of disability insurance is to to replace an individual’s income should they be unable to work as a result of either an accident or a sickness.In this article, we will discuss the disability insurance for but-sell policies.

Often, there are several owners for a business. In this situation the owners may enter into buy/sell agreements which will govern how the business is dealt with in the event one or more of the owners dies, becomes disabled or suffers a bankruptcy. Disability buy-sell insurance is designed to assist healthy owners to fund the purchase of a disabled owner’s share of the business. In fact, the likelihood of a long-term disability affecting the business increases as the number of owners in that business increases. Therefore, it is extremely important for business owners to consider disability buy-out insurance as part of their buy-sell program.

When reviewing the provisions of a disability buy-out policy, it is important to consider the following:

a) The Elimination Period or waiting period the person must be disabled before the benefit will be paid. Many insurers use longer Elimination Periods of 12, 18 or 24 months for this type of policy.

b) The definition of disability used in the policy and the definition of disability in the buy-sell agreement must match the definition in the disability policy so that the funds become available when needed to fund the buy-out.

c) The method of benefit payment.

There are several methods that can be used to pay the benefits, including lump sum, installments or combination of the two. The premium for a policy with a lump sum benefit will be higher than the premium for a policy where the benefit is payable in installments.

Insurers have a number of requirements for this type of coverage

a) The business owner must own a minimum percentage interest in the business and When the insured suffers a disability which triggers the buy-out and the benefits are paid under the policy, the coverage terminates.

b) The insured business owner must be employed by the business

A buy-sell agreement must be in place between the owners

a) It must provide for the purchase and sale of shares in the event one of the business owners becomes disabled

b)Specify the purchase price for the shares

Some policies also stipulate that the insured cannot be working in the business organization while the disability buy-out policy pays benefits. If the insured is still affiliated with the company in any capacity, the insurer assumes that they want to maintain their ownership interest and no residual or partial disability provision is included in these policies, due to the implication that the insured has returned to the business and does not want to be bought out.

Any subsequent recovery of the insured has no impact on the availability of the benefit, regardless of whether it is paid as a lump sum or on an installment basis.The maximum benefit provided under a disability buy-out policy is limited to the total value of the business.

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With a one in five chance of becoming disabled and unable to work at some point in your life, according to the U.S. Census Bureau, perhaps the first question you should be asking is, “Do I have disability insurance”? Many employees are under the belief that their employers have provided coverage for them if an accident were to occur. While workman’s compensation will cover a job related injury, most accidents occur while you are not at work. By reviewing your current insurance, you can determine whether or not you have adequate coverage. Even employees under union contracts may be surprised at how little coverage they have for short or long term disability.

If group disability insurance is not provided through an employer, or if the coverage is not adequate, an individual disability insurance policy should be considered. This type of insurance can be purchased from the same agents who sell life insurance. Short-term disability insurance normally provides up to 60-70% of your pre-disability salary and generally pays benefits for up to three to six months. Most policies have a maximum monthly benefit and a limit to the amount of time benefits can be received.

Depending on whether you suffer an injury or become ill determines when benefits will start being paid. Benefits may be paid right away in the event of an injury. However, if you become ill, it may take longer for benefits to start because most policies have a longer waiting period for sickness claims.

What happens when the six month short-term disability coverage runs out? Many people are under the assumption that if they cannot work, that Social Security will take over. Social Security benefits are limited to disabilities that are expected to last a year or end in death. Also with Social Security, one cannot engage in any type of work in order to qualify. With a 72% denial rate, can making the assumption of getting coverage through Social Security be worth the risk?

What about long-term disability? Long-term disability picks up where the short-term disability left off. This type of policy also pays a percentage of your salary (usually 50-60%) depending on the policy. Long-term disability benefits can be for as little as one or two years and as great as to age 65.

Understanding disability terminology goes a long way in helping understand the coverages available. Terms such as: elimination period, non-cancellable, and guaranteed renewable policies are just a few of the features to learn about in order to decide the right coverage needed. Going over these options and other features with a qualified insurance agent can make all the difference. These options and features do vary by state and by occupation class.

The odds are that your are more likely to become disabled than to die prematurely. Statistics say that people do not believe that they will become disabled, but the facts are that one is 16 times more likely to go through a mortgage foreclosure due to a disability rather than death. Employers will not continue to pay salaries if an employee cannot work.

So, are you insurance poor? Do you think you don’t need disability insurance? About 90% of all disabling injuries happen outside of work. Do you have the 2 1/2 years of recommended emergency savings to cover your bills that will keep coming even if your paycheck does not?

Suffering through financial hardships can be devastating not only for the injured by hindering recovery time, but for the loved ones as well. Being prepared and knowing that you have the coverage necessary will lead to a stronger sense of financial peace and well being. Many people believe they cannot afford disability insurance. Perhaps it would be better said, “Can you afford not to?”

Educate yourself by talking to an agent that can help determine what your needs are. Do not assume you have coverage and then find out when it is too late that you do not. Do not wait until it is too late to find out that you are insurance poor.

As a Federal Government worker, it is important that you understand the benefits provided to you by the FERS Disability program. A proper understanding will allow you to effectively assess the income protection you have and make an educated decision of whether or not you should obtain individual Disability insurance as a supplement to what you are already provided.

Without going too far into detail, Federal Government workers are provided Disability insurance benefits through the FERS program once they have completed 18 full months of service. For any injury or illness which restricts you from performing your current job and is expected to last beyond one year, you are eligible to receive 60% of your annual salary during the first 12-months of a disability claim and 40% of your annual salary for each year thereafter.

Something that you may not know is that although you are provided 60% and 40% Disability coverage, you may actually receive a substantially smaller benefit than you expect at claim time. Since FERS Disability benefits are primarily paid for by the Federal government, any benefits you receive during a claim are taxable as ordinary income. Due to this taxation of benefits, along with the reduction from 60% to 40% coverage, Federal government workers are faced with a tremendous shortage in income protection. Thus, Federal workers are able to obtain individual Disability insurance as a supplement to their provided coverage.

Similar to how individuals in the private sector purchase individual Disability insurance to supplement their group Disability insurance, Federal government workers can also obtain individual Disability insurance to supplement their FERS Disability benefits. Amongst the many options that are made available for Federal employees, there are some that are more attractive than others.

As you consider purchasing individual Disability insurance, look for two primary characteristics in a policy. The first is to be sure that you are not restricted to which policy provisions and riders can be added to your policy. If you are going to spend money on obtaining individual coverage to properly and effectively protect your income, be sure that you are not restricted on what you can add to your policy. Secondly, be sure that your individual policy benefits will not offset with Social Security disability benefits. Your FERS Disability benefits will already be off-settable with Social Security Disability. It is bad enough that the majority of your FERS benefits may offset with Social Security benefits but again, if you are spending money in order to properly protect your income, you should be sure that you are not paying for Disability insurance that will be reduced as your FERS benefits are already.

Purchasing individual Disability insurance as a means of supplementing the shortage that exists in your FERS Disability coverage is a responsible and intelligent way of effectively protecting your income, your family and your future. Be sure that you work with someone who is familiar with the details associated with FERS Disability benefits and also the individual options available for Federal workers. For more information relating to your FERS benefits, visit Disability benefits for Federal Government workers.

Incoming search terms:

Disability income (DI) insurance is able to compensate a policy holder in the event of an accident or illness that results in lost wages due to being unable to operate in one’s regular employment duties. A lot of employers offer a group disability insurance scheme as part of the employment package, so that’s going to provide cover for most workers. However, for certain professionals, such as the self-employed its necessary to obtain a disability income plan direct from one of the specialist insurance companies.

The individual disability insurance schemes often provide a maximum pay out in the region of 60 – 70 percent of the policy holders gross annual income. Insurance companies limit the compensation package to encourage the insured to return to work as soon as possible.

Disability insurance is a form of insurance designed to provide periodic income to a policyholder in the event of his/her inability to work as a result of sickness or injury. Disability insurance with coverage for periods longer than six months is termed long-term disability insurance. Typically, disability insurance policies are designed to pay forty to sixty percent of an insured person’s actual earnings on tax-free basis.

Disability insurance may be purchased by individuals, provided by the government, or included in insurance packages provided by employers. Most employer-provided disability insurance coverage ends in the event of termination or change of a job. Several states in the U.S. manage a public disability insurance coverage scheme, which is funded by payroll taxes.

Among the most important factors to be considered while opting for a disability insurance policy are definition of total disability and renewability. The three basic definitions of total disability are own-occupation disability insurance, income-replacement insurance, and gainful-occupation coverage. The basic types of renewability features widespread in disability insurance policies are non-cancelable and guaranteed renewable, guaranteed renewable, and conditionally renewable.

Other fine points to be evaluated for a disability insurance policy are residual disability insurance for persons actively engaged in their jobs but restricted due to sickness or injury; presumptive disability insurance that offers protection in the event of severe disabilities; and recurrent disability insurance for protecting against disability occurring soon after recovery from disability. Details such as elimination period, benefit period, and policy exclusions must be carefully addressed. Optional riders commonly available with disability insurance are cost-of-living adjustment, future-increase option, automatic-increase rider, and social-insurance-substitute rider, in addition to residual-disability insurance.

All of us should have a financial to-do list. Purchasing disability insurance probably ranks pretty low on this list. Most of us figure that we won’t need it. But according to current statistics, approximately 30% of people age 35 to 65 will have a disability lasting at least 90 days. These disabilities can seem as minor as a broken bone, an atypical pregnancy, or an emotional conditional, but all of these can cause you to stay away from your job. If you should ever need disability insurance, you will be glad that you took this precaution. A great number of people without coverage could be driven deeply into debt.

Most people think they do not have to purchase additional disability coverage because they are already covered through work. But most disability insurance covered through employers only provides 60% of your salary. Further, these policies usually set a monthly maximum of $10,000, which is less than 60% of highly compensated employee’s salary. Another problem is that these benefits are fully taxable. This means your net payment is a lot less than the 60% of your salary. These employees find themselves trying to survive on 40% of their salary.

When shopping for a policy, look for the strength of the company. You need to determine whether the insurance company is financially sound. Also make sure they will be able to pay their claims in the future.

On your contract, check the renewability. There are three options. The non-cancelable contract is the best. This type of contract locks in your rates and benefits. The only person that can make changes is you, not the insurance company. Next in line is the guaranteed renewable policy. Once you have purchased your policy, the insurance company cannot drop you but they can raise the prices. The worst type of policy is the conditionally renewable policy. The insurance company can raise rates at any time or put any condition on the policy.

Pay attention to how the insurance company defines “total disability”. The most lenient, consumer-friendly approach is “own-occupation disability”. This means that if you are disabled and cannot perform your principal job duties, you will be paid your disability benefit, even if you can perform other tasks.

The most stringent definition of “total disability” is “any occupation disability”. This means that you will not be paid any benefits unless you are unable to do any kind of work and are completely unemployed. You will find that many insurance companies define “disability” somewhere in between the two extremes defined above.

It is prudent to purchase partial disability or residual coverage. This means that the insurance company will pay partial disability benefits if you can work at your job only part time. Their employer would pay for the time actually worked and the partial disability coverage would pay the other portion.

The price of disability insurance premiums typically cost 3% of your annual income. This varies based on factors such as age, gender, occupation and health history. When pricing your policy, the insurance company will categorize you according to your occupation class. Your policy will be more expensive if your occupation is more likely to results in a disability.

As you can see, it is financially prudent to purchase disability insurance if you would lose your income because of a disability. Only the wealthiest people are not in this category. There are many factors involved when purchasing this type of insurance. Take your time and educate yourself. Chances are, you will be glad that you did.