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.
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.