How Your Disability Insurance Can Help You Now Part 2

When I talk to groups about various coverages we offer, I mention the Holy Trinity of insurance, which is their major medical, their life insurance and their disability (DI) coverage. That's how important I think it is. In the previous post we went over the basic premise of disability income insurance  and why you may want to enroll in it. Let's take a look at a few other aspects of this part of your financial game plan.

One of the important things to consider when purchasing DI is the elimination period, which is the number of days before the benefits actually begin. For instance, let's assume that you get sick on January 1, but your elimination period is 7 days. Your benefits won't be "triggered" until January 8. Think of it as a deductible, but in time instead of dollars. And just like any other deductible, the longer the deductible, the lower the premium.

So the question to ask yourself is how long you can "self-insure" before the benefits kick in. If you have an ample number of sick days at your disposal then you can use those first and can stretch out that elimination period, thus lowering the cost of the insurance to you.

And some policies will have different elimination periods for sickness and injuries. Many group policies will have a "0,7" which means it will begin paying on the first day after an accident, but on the 8th day after a sickness. Be aware that if you have group coverage, maternity may be covered, but as a sickness (even though it may have been an "accident" lol). Individual policies will have longer elimination periods, like 30 or 60 days.

As I mentioned previously, your income will be looked at in the underwriting process. Some companies will want to see tax returns when you apply, but there are also carriers who look at this at the time of the claim. And if you are self-employed your income can vary from year to year. This was a huge concern for my realtor friends, so I picked up the phone and spoke to a claims specialist for one of the companies I represent. Her response was that incomes that weren't steady were already figured in to the equation and that "we just want to make sure they had a job when they became disabled". Makes sense.

Remember that your DI plan will generally cover a maximum of 60-70% of your income. To deter against insurance fraud (and we would never do that), you are allowed only one policy at a time. If you do have more than one, the companies will subrogate, or coordinate with each other to pay your claim. In other words, if you're paying more than one premium you will still be getting the same amount of benefits. As my mentor told me when I first got into the insurance business, "We don't want people making more when they're out of work than when they were working."

And yes, if you have a policy and contract the Coronavirus, you should expect to receive benefits for being out of work. However, be aware that just like any other pre-existing condition, if you've got the virus and apply after, you may be declined.

If you're interested in pricing for a policy, click on the "Get a quote here" box in the upper right side of this page. There's no obligation to purchase and you can get a decent ballpark on rates.

And please, stay healthy and let us know if you have any questions.

Chris Castanes is the president of Surf Financial Brokers, as well as a professional speaker helping sales people be more productive and efficient.