DISABILITY INSURANCE FREQUENTLY ASKED QUESTIONS
1) How much does disability insurance cost?
2) What if I am pregnant?
3) Can I tax deduct my disability insurance premiums?
4) What if I leave the country?
5) Can I purchase coverage if I have a medical condition?
6) Can my employer pay or reimburse my premiums to me?
7) When is the best time to buy a disability insurance policy?
8) What is the application process?
9) What is underwriting?
10) How long will it take to get coverage?
11) What happens to my policy if I change jobs or move to another state?
12) Can I see my own physician if I become disabled?
13) What are some common exclusion?
14) What are the major differences between an individual disability income insurance policy and a group policy?
1) How much does disability insurance cost?
The cost of the policy will depend on several factors including, age, occupation, health status, smoking status and gender. The cost should not be the first consideration when it comes to disability insurance. Buyers should be more concerned with the quality of a policy than its price.
Normal pregnancy is not covered with individual disability insurance policies. However, if any complications occur from either the pregnancy itself or delivery, which leave you unable to work, it may be handled like any other disability and benefits may be payable. Check the policy to see if complications of pregnancy are covered. Pregnancy can be covered under a disability insurance policy.
3) Can I tax deduct my disability insurance premiums?
If your practice or corporation pays the disability insurance premium for you, it may be tax deductible. However, if the premiums are tax deducted, any benefits received will be taxable. Some people may tell you to write off the premiums until a potential disability occurs and then pay your next premium post-tax. The theory is that since your last premium was not deducted, the benefit will be tax free. Do not believe this and do not follow this advice.
4) What if I leave the country?
Depending on the policy, some policies will cover foreign travel. Other policies will suspend the contract while you are abroad. If you go on active military duty, most companies will put your policy in suspense until you are off of active duty. Check your policy for these important provisions.
5) Can I purchase coverage if I have a medical condition?
The type and severity of the medical problems will be evaluated during the underwriting process at the insurance company. Generally, one of three things will happen. The insurance company can charge a higher premium for the policy, exclude the condition from the policy (you will not receive benefits for a disability resulting from this preexisting condition), or decline you for insurance altogether.
6) Can my employer pay or reimburse my premiums to me?
Your employer can pay for your disability insurance coverage. However, your employer will most likely be deducting the premium and any benefits received will be taxable to you.
7) When is the best time to buy a disability policy?
Now. The best time to buy a disability policy is when you are young and healthy. This is because the premiums are based largely on health and age. The younger and healthier you are, the less expensive it will be.
8) What is the application process?
Once you have made a decision on the type of policy and amount you wish to apply for, we will either meet with you or call you to complete the initial application. The next step is scheduling a medical exam. The exam can be completed at home or work at no cost to you. Once all the forms are completed, everything will be sent to the insurance company to go through the underwriting process. The entire process is reviewed here.
Underwriting is the process used by an insurance company to determine whether an applicant will be accepted or declined for insurance. The insurance company classifies the accepted applicants into different risk categories to charge the proper premium. If you have/had health concerns or have dangerous hobbies, you will most likely be placed into a high risk class and charged a higher premium.
10) How long will it take to get coverage?
The underwriting process generally takes anywhere from 4 to 8 weeks before a decision is made. It could take longer if you do not schedule your medical exam in a timely fashion or release the necessary documentation to the insurance company (i.e. financial documentation). If the insurance company has difficulties obtaining your medical records or requests additional testing/explanations for a preexisting condition, the length of time could be extended.
11) What happens to my policy if I change jobs or move to another state?
If you policy contains the proper contractual provisions, the policy benefits typically will not change. Individual disability insurance policies are portable. You may take the policy with you throughout your career, even if you change your employer, occupation, or move to another state.
12) Can I see my own physician if I become disabled?
Yes. Most insurance companies will allow you to see your own doctor if you are disabled. However, the companies reserve the right to have their own physicians evaluate your disability.
13) What are some common exclusions?
-Mental/Nervous Disorder (Typically limited to 24 months of cumulative benefits during a lifetime)
-Act of war or riot
-Injuries while committing a crime
-Normal pregnancy (complications are insured like any other disability)
-Active Military Duty
14) What are the major differences between an individual disability income policy and a group policy?
Benefits from an individual disability insurance policy are tax free if you pay the premium with after-tax dollars. The benefits are typically higher and the premium rates are guaranteed (usually to age 65/67). If you leave your employer or change occupations, you may take your policy with you. Also, individual coverage will generally have the most favorable definition of disability.
Group coverage is typically taxable since the employer pays the premium. Benefits are often limited to only a portion of your income (i.e. 60-67%) and the policy may be canceled or changed at any time. The premium rates are subject to increases and the definition of disability is more restrictive. If you ever leave your employer, your policy is left behind as well.
