Disability Insurance  Disability Insurance Terms |
| Automatic Increase Rider (AIR): |
| This is an optional rider which will increase your monthly indemnity by 4% each year for the first 5 years of the policy. You can opt out of an increase each year; however, it is a simple way to make sure your DI protection grows each year with your income. |
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| Benefit Period: |
| In the “About Disability Insurance” section of our website, we talked about the various reasons why you should own disability insurance. There is a chart provided which deals with the probability of becoming disabled, from this chart it can be determined that if you do become disabled, the average length of disability is 3.2 years. With this factual statement in mind, only you can select the benefit period that is perfect for you. Your options are a 2 year, 5 year, to age 65, or X45 lifetime benefit period. Once more, the shorter the benefit period is the less expensive the policy is. Whereas, a five year benefit period covers the average length of a disability, it would be a shame if you became permanently disabled at age 35, and know that your last monthly benefit check will come at the age of 40. You will discover that the difference between the premium of a 5 year benefit and one to age 65 is nominal. The most common benefit is to age 65. |
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| Cost of Living Adjustment Rider (COLA): |
| This is often referred as the COLA rider and is also one of the more expensive riders available. We think that it is very important for younger people to have this because they are more at risk due to inflation. Here is an example to make it easier to understand. |
| Explanation: |
| If you decide to purchase a disability insurance plan at the age of 30 for $4,100 a month, then, the very next week you become permanently disabled due to a car accident. If you plan does have COLA, you can collect $4,100 a moth for as long as your benefit period will allow. If you do have a COLA rider your monthly benefit will increase each year due to inflation. |
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| Elimination Period: |
| This is also known as a waiting period which is the time period at the beginning of a disability claim in which you will not receive any benefits. This time period determines how expensive or inexpensive your policy premium will be, such as a longer the elimination period is, the more inexpensive your policy premium will be. You can choose from the following elimination periods: 30, 60, 90, 180, 365, or 720 days. Although a 60 day waiting period is more expensive than a 90 day waiting period, a lot of times that is the only option for individuals as they do not have the funds to make it through the last 4 months without an income. The most frequent elimination period is 90 days. |
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| Future Increase Option Rider (FIO): |
| This is an optional rider that is designed to safeguard your future income. We hope that you are not planning to make the same level of income for the rest of your working career. This particular rider can be added to your policy so if you experience any pay increases, you can have the option of coming back and purchasing more disability insurance. Also, health changes are not taken into consideration for this particular rider. |
| Explanation: |
| For example, if you are 3 years old, make $80,000 a year; our agency could issue you a policy that will give you $4,100 a month. Then by age 40 you are bringing in $150,000 a year and if your health risk changes between the ages of 30 and 40, which would usually prevent you from purchasing disability insurance and the only way we could protect you with this new level of income would be if you had the future increase option on your current plan. If not, then if you ever became disabled you would only receive $4,100 a month. In view of the fact that adding the future increase option is rather inexpensive, we would recommend at least $1,000 of FIO on your plan. |
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| Group Disability Replacement Rider (GDR): |
| If you currently have group LTD through your present employer, this would be an optional rider that guarantees you the ability to convert a certain percentage of the group LTD into your personal plan if you decide to leave the company for any reason. It basically makes your LTD portable. |
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| Monthly Benefit: |
| The function of disability insurance is to replace anywhere from 50 to 65% of your monthly income should you become disabled in any way. Many individuals have various sources of income, some of them may be earned income and others may be unearned income. Unearned income would be defined as income that continues even if you became disabled. Some examples would be rental property income, dividends, retirement income from the military, and many more. |
| Explanation: |
| Once you have established what income would continue if you became disabled, and what discontinue, you can determine how much monthly income you would need from a disability insurance policy. On an obvious note, the more monthly benefit you choose to apply for, the more expensive the policy premium will be. You can offset some of this expense in other areas of your policy design such as the benefit period, elimination period, and optional riders. |
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| Residual Disability Rider: |
| Although this is an optional rider, no one from representing our company will allow you to purchase a policy without this rider added on to the policy. This rider might be the most important rider that we have available. |
| Explanation: |
| If you became sick or injured and your income dropped to a level more than 20% of your previous income, we will start to make payments to you to replace your lost income. Just think about it, how many friends, family members or even acquaintances do you know that had to take time off of work because they had a heart attack, diagnosed with cancer, or became pregnant? Most of the claims for residual disability happen after a total disability. The client returns to work and finds out that they have to work exceptional harder then they had worked prior to the disability to get their income back up to what it was before. This policy will continue to pay your benefits until your monthly benefit check drops below $500. |
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| Social Security Offset Rider (SIS): |
| This rider is an option. We may or may not include this rider on your policy, but you can choose to have your monthly benefit without it as 100$ indemnity. If you use this rider, it is about 10% less expensive for your total policy premium then the same amount for you monthly benefit as a monthly indemnity. |
| Explanation: |
In simplest terms, you are not eligible for social security disability unless you are “totally and completely disabled, with no hope of recovery, for a period of least one full year.” This is very difficult to meet the definition of total disability. Our company will give you the entire monthly benefit for the first year of your claim and after a year will require you to apply for social security disability benefits. If you happen to get denied for the social security disability benefits, then we will probably continue to give you the entire monthly benefit. If they do give you something, than we will pay you less up to a maximum of $1,500.
The bottom line is if you become totally disabled you will receive a guaranteed monthly benefit, from either our company or social security. You will receive a 10% discount if you include the rider just for applying to social security if you put in a claim. |
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| True Own-Occupation Definition of Total Disability: |
| The definition of total disability is you are not able to perform the material and substantial duties of your occupation due to sickness or injury. Your occupation is defined as the occupation(s) you are involved in at the time you become disabled. If you are not able to work in your occupation then you will considered totally disabled. If your occupation is restricted to a single medical specialty certified by the American Board of Medical Specialties or a single dental specialty recognized by the American Dental Association then we will consider your specialty to be your occupation. |
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| Unemployment Premium Waiver: |
| This inexpensive rider waives the disability premiums for up to one year if you should ever collect unemployment benefits. |
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