Disability Income Insurance

An individual disability income insurance policy can help supplement your group long term disability benefits and protect a larger portion of your income. This, in turn, provides a fundamental layer of security for your financial future. An individual disability income insurance policy you purchase on your own is fully portable, meaning you won’t have to worry about losing coverage if you change jobs, and the benefits paid are tax free if you are the premium payor1. In addition, an individual disability income insurance policy is non-cancelable by the carrier (as long as the premiums are paid), and with a guaranteed renewable policy, your premiums will never change for the life of the policy.

There are two types of disability policies: Short-Term Disability (STD) and Long-Term Disability (LTD)

1. Short-Term Disability policies (STD)

Short-Term Disability policies (STD) have a waiting period of 0 to 14 days with a maximum benefit period of no longer than two years.

2. Long-Term Disability policies (LTD)

have a waiting period of several weeks to several months with a maximum benefit period ranging from a few years to the rest of your life.

Disability policies have two different protection features that are important to understand.

1. Noncancelable

Noncancelable means the policy cannot be canceled by the insurance company, except for nonpayment of premiums. This gives you the right to renew the policy every year without an increase in the premium or a reduction in benefits.

2. Guaranteed renewable

Guaranteed renewable gives you the right to renew the policy with the same benefits and not have the policy canceled by the company. However, your insurer has the right to increase your premiums as long as it does so for all other policyholders in the same rating class as you.

Additional purchase options
Your insurance company gives you the right to buy additional insurance at a later time.
Coordination of benefits
The amount of benefits you receive from your insurance company is dependent on other benefits you receive because of your disability. Your policy specifies a target amount you will receive from all the policies combined, so this policy will make up the difference not paid by other policies.
Cost of living adjustment (COLA)
The COLA increases your disability benefits over time based on the increased cost of living measured by the Consumer Price Index. You will pay a higher premium if you select the COLA.
Residual or partial disability rider
This provision allows you to return to work part-time, collect part of your salary and receive a partial disability payment if you are still partially disabled.
Return of premium
This provision requires the insurance company to refund part of your premium if no claims are made for a specific period of time declared in the policy.
Waiver of premium provision
This clause means that you do not have to pay premiums on the policy after you’re disabled for 90 days.