| One out of every four Americans will miss at least 90 | | | | if you can afford to live half a year without income. |
| consecutive days of work because of an injury or | | | | With a six month waiting period, you begin to accrue |
| sickness between the ages of 35 and 65. Disability | | | | payable benefits in the seventh month and would get |
| insurance can help prevent such medical disasters | | | | a check at the 225th-day (seven-and-a-half month) |
| from becoming financial disasters. | | | | mark. |
| However, disability insurance is usually obtained through | | | | - Women should ask their agents to check whether |
| deeply flawed group policies offered by employers. | | | | unisex policies are available. These might cost 10% to |
| Employees with such group coverage often aren't | | | | 20% less. |
| adequately protected. | | | | MUST-HAVE FEATURES |
| Here's what to watch out for and how to get the best | | | | Expect an insurer to offer coverage for up to |
| coverage... | | | | two-thirds of your current wages, not to exceed |
| PROBLEMS WITH EMPLOYER PLANS | | | | $15,000 per month. |
| The employer-sponsored disability policies in which all | | | | Three provisions that you also should insist on having... |
| or part of the premiums are paid by the employer, | | | | - "Own occupation" protection. Without this provision, |
| generally claim to replace 60% or 70% of an | | | | your insurer could reduce benefits by the amount |
| employee's income when he/she is disabled beyond | | | | you're capable of earnmig, even in a line of work that |
| the typical 90 or 180 day elimination (or waiting) period. | | | | doesn't appeal to you. |
| However, these promises are empty and deceptive. | | | | Example: A stroke makes it impossible for a woman |
| Insurers are allowed to reduce the benefits they pay | | | | to continue her career as a surgeon. Without "own |
| dollar for dollar for any benefits the disabled employee | | | | occupation" protection, her disability insurer might argue |
| receives from his state workers' compensation | | | | that she still could work as a janitor and then reduce |
| program ... Social Security disability program... the state's | | | | her benefits by the $2,000 a month she could earn in |
| disability program ... and even cash settlements | | | | that job. With "own occupation" protection, the woman |
| received for pain and suffering if the employee was | | | | receives her full benefit for as long as she can't |
| injured in an accident that caused his disability. | | | | perform surgery. |
| Even worse: Any money these insurers pay out to | | | | - Noncancelable and guaranteed renewable to age 65. |
| group disability policy holders is taxed. Beneficiaries end | | | | With this clause in the contract, your insurance |
| up with only a small fraction of what they thought they | | | | company cannot terminate your coverage until you |
| were insured for. | | | | turn 65, even if your health deteriorates. Guaranteed |
| Other drawbacks... | | | | renewable policies also have fixed premiums. |
| - An employer might eliminate its disability plan at any | | | | - Total disability and partial disability coverage. Some |
| time. | | | | individual policies provide for both total and partial |
| - An employee may not be able to take this disability | | | | disability benefits. |
| policy with him if he quits or is fired. | | | | Example: A woman has a heart attack but still can |
| - If a claim is ultimately denied, an employee in the | | | | work 20 hours per week. If her policy covers only total |
| group plan must appeal the denial in a timely manner, | | | | disability, her insurer will not owe her a dime. With total |
| then sue in federal court to recover only his past-due | | | | and partial coverage, she will be compensated based |
| benefits, some interest and attorney fees if the court | | | | on the percentage of her income that she has lost. |
| allows. The horror of group disability litigation is that | | | | RECOMMENDED FEATURES |
| there is no trial by jury, no recovery for emotional | | | | - Cost-of-living adjustments. This feature increases |
| distress and no opportunity to seek punitive damages | | | | your monthly benefits after disability strikes to keep |
| under the Employee Retirement Income Security Act | | | | pace with inflation. It's highly recommended for those |
| (ERISA). The carrier is required to pay only what it | | | | younger than 40 but not vital for those over 50 - |
| owed - this is like robbing a bank and returning the | | | | inflation won't have as much time to deplete the value |
| money years later without any penalty or jail time. | | | | of their benefits. Expect a policy that provides an |
| ADVANTAGES OF INDIVIDUAL COVERAGE | | | | annual 3% to 6% increase in benefits to cost 8% to |
| It is best to purchase your own individual disability | | | | 12% more than the disability policy that doesn't provide |
| coverage through an insurance agent, whether or not | | | | such an increase. |
| you are covered through your employer's group plan. | | | | - Future increase option. It makes sense to add on |
| You will be given the maximum benefit you're owed, | | | | more disability coverage over the course of your |
| tax free, even if you get other forms of compensation | | | | career to keep up with your increasing wages. A |
| for your injury ... you, not your employer, have control | | | | future increase option gives you the right to buy more |
| over the coverage ... and if necessary, you can take | | | | coverage at the initial contract rate, even if your health |
| the insurer to court, get a trial by jury and seek not | | | | declines. This provision typically isn't available past age |
| only the benefits owed but also punitive damages if | | | | 50. |
| your state allows. | | | | WHAT TO AVOID |
| The downside is cost. A 55-year-old man in good | | | | - "Except fraud" provision. If an "except fraud" clause |
| health might spend $280 per month for a well-designed | | | | is written into your contract, your insurance company |
| disability policy that replaces 60% of wages up to | | | | can attempt to take away your policy at any time by |
| $4,000 a month after a 90 day waiting period. A | | | | claiming that you materially misstated your medical, |
| 55-year-old woman might spend around $325 (women | | | | financial or occupational status when you applied for |
| are more likely to become disabled, thus their | | | | coverage. Insurance companies sometimes use this |
| coverage will cost more). For a 45-year-old man, the | | | | clause to deny benefits to honest policyholders when |
| cost might be $199 a month. For a woman, it might be | | | | they find the slightest hint of an error on the application. |
| $281 a month. | | | | Better: Ask for a "two-year contestability policy" |
| Two ways to cut the cost of your coverage... | | | | instead. After your contract has been in force for two |
| *Increase your waiting period from 90 to 180 days. | | | | years, the insurance company cannot contest any |
| This should reduce premiums by about 20% compared | | | | statements in your application. |
| with a 90-day wait, but this strategy makes sense only | | | | |