The benefit amount on your policy is the monthly amount the policy pays you during a disability
- The maximum amount available is usually around 60% of your income
- If YOU pay the premium, the benefit is TAX-FREE
- If your employer pays the premium, the benefit is taxable
- If you already have existing LTD coverage, that affects the amount you’re eligible for
How Much Insurance Do I Need?
Deciding how much disability insurance to buy comes down to three factors:
- Coverage. Your benefits should cover bills, immediate expenses, savings, and long-term plans that require investment (like retirement).
- Duration. Short-term disability insurance lasts for just a matter of months, while long-term disability insurance can last for many years.
- Cost. The cost of your policy is determined by its coverage amount and duration, plus factors like your age, health, and gender. Most people can expect to pay between 1-3% of their annual income on disability insurance.
Elimination Period
The amount of time you’d have to wait from the start of your disability to when you start getting benefits.
- Policies typically have waiting periods of 60, 90, 180, or 365 days.
- The longer the waiting period, the less expensive the policy.
- The most common, and the most cost effective, waiting period is 90 days. If you move to a shorter waiting period, the price goes up disproportionately.
Benefit Period
The benefit period is the length of time the benefit amount will be paid out (each month).
- Policies typically have periods of 2, 5 or 10 years or up to retirement age (65 or 67).
- The longer the period, the higher the cost of the policy.
- A 5-year benefit period would cover the average duration of most long-term disabilities.
Increase Options
Allows you to increase your benefit amount as your income increases, regardless of any changes in your health status.
Cost of Living Allowance
COLA: An enhancement rider added to a disability plan that would increase the monthly benefit by the Consumer Price Index not to exceed a ceiling of typically 3% or 6% compounded or simple interest per year during a claim. This would only be triggered during a claim so it becomes important to keep disability benefits up to date through annual reviews. This rider is designed to prevent inflation from eroding at your benefit.
Student Loan Protection
This optional enhancement rider can help provide peace of mind to those who are early in their professional careers. While your income may be on the rise, it could be several years before your yearly earnings exceed your loan balance – a time when many professionals feel particularly vulnerable to a disability that could force them out of work or practice. Student Loan Protection is specifically designed to protect you during this time by providing an added benefit amount, above and beyond what you might purchase to protect your income.
Non-Cancelable
A non-cancelable policy means that as long as you pay the premiums, the insurer can’t cancel the policy, change the premiums or change the benefits. Basically, you “lock in” all aspects of your policy.
Own-Occ v. Trans-Occ. v. Any-Occ.
Transitional own-occupation policies limit your benefits based on the difference between your total disability benefit amount and your earned income following your injury. If your new income exceeds your previous income, you may only receive partial benefits.
The own-occupation policy protects your ability to work in your field of expertise. You’re covered if a disability prevents you from performing in the role you had before your injury. Even when you get a new job in a related field or an entirely new one, you still qualify for the benefit period. A true own-occupation policy protects you as you perform your medical specialty and earn income while you adjust to living with an illness or injury.
Only five providers offer true own-occupation policies to physicians up to age 65:
- The Guardian Life Insurance Company of America
- Standard Insurance Company
- Principal
- Ameritas
- MassMutual
Any-occupation policies have the lowest premiums and provide the least amount of coverage. You receive monthly benefits only if you can’t work in any occupation. For example, if you can’t work as a surgeon but can provide consultative services in a hospital, you aren’t considered disabled under an any-occupation plan.
