Are you one of the many people that has not read your disability insurance policy? Or your HR benefits handbook? If so, you are not alone!
While many people have disability insurance, very few have taken the time to understand exactly what their policy covers. Disability insurance can be difficult to decipher because of all of the riders offered and lingo used. However, it’s a crucial part of your financial plan – studies show there is a 1 in 4 chance of being unable to work for at least a year at some point in your career.
Many smart people make the common mistake of assuming that all policies are created equally and that what their employer offers is good enough. Do you have the best possible coverage? Here are 6 questions to ask to better understand your policy:
1. Does your policy provide “own occupation coverage”?
Own occupation coverage means that your policy pays a benefit if you cannot perform the ‘material and substantial duties’ of your job, as opposed to any job.
2. What is the Definition of Disability?
What requirements must be met in order to receive benefits? For some policies, you must be unable to do at least one material job duty, others will require a loss of income. Some policies will not consider you disabled if you work at all.
3. If your policy is provided by your employer, is it portable?
What would happen if you were to leave your job? Could you continue your policy? What would it cost? If your company-sponsored policy is not portable, you should purchase an individual policy.
4. Can your benefit be increased as you earn more?
One of the most valuable riders that you can have is a Future Purchase Option that allows you to increase coverage as your income increases, without having to requalify medically.
5. Does your policy offer residual or partial benefits?
Most people could do some of their work remotely, so it is important to have a policy that will pay partial benefits. Usually, a 20% loss in income is required to trigger partial payments.
6. Are there any limitations or exclusions?
Some policies have limitations, for example: only 24 months of coverage for mental disorders. If you had a health issue at the time your policy was issued, there might be an exclusion. For example, a pregnant woman applying for disability insurance would have an exclusion for any complications related to pregnancy. It may be possible to remove the exclusions if the condition no longer exists.
If you need help understanding your coverage, please contact us for a complimentary review at 212-933-9456 or erin@dynamainsurance.com.
