In What Form Do Disability Income Policies Typically Pay Benefits

Question: Disability Income policies

Answer: Valued contracts or stated amount contracts. The amount of benefit an insurance company pays is based on the individual’s net earned income.

Question: How do companies will set a maximum % of the applicant’s earned income?

Answer: 65% for higher incomes or 85% for lower incomes.

Question: Flat amount method

Answer: Policy specifies a flat amount that will be paid.

Question: Probationary Period (Waiting Period)

Answer: Often 10 to 30 days from the policy issue date during which benefits will not be paid for illness-related disabilities.

Question: Who does the probationary period apply to?

Answer: Applies only to sickness not accidents or injury disabilities.

Question: Elimination Period

Answer: Eliminate coverage for short-term disabilities in which the insured will be able to work in a relatively short period of time. In most policies range from 30-180 days.

Question: Benefit Period

Answer: The monthly disability benefit payments will last for each disability, after the elimination period has been satisfied. Policy periods vary from 1 year, 2, years, 5 years. The longer the benefit the higher the premium will be.

Question: Recurrent Disability

Answer: Usually within 3-6 months when recurrence of an illness or injury will be considered a continuation of a prior period of disability.

Question: Waiver of Premium Rider

Answer: Waives premium for insured because they become totally disabled. Coverage remains in force until insured is able to return to work. If person cannot return to work the premiums will continue to be waived by insurance company. Usually expires when person turns 65.

Question: Cost of Living Adjustment (COLA) Rider

Answer: Help protect against inflation. Increased monthly benefit once claim has been begun. Annual.