Options for customizing your disability insurance policy
- Benefit period: the length of time a benefit is paid during your disability. This period can vary from 2 years of coverage, to the age of 65 depending on your occupation, budget, and requirements.
- The amount of coverage you purchase cannot exceed a percentage of your current earnings (i.e. you cannot insure what you do not have). Benefits are always paid out tax free.
- Occupation affects costs. People in safe jobs are less likely to become disabled than people in dangerous jobs, so their insurance costs are lower..
- Waiting period: the number of days from the date you are disabled until the benefit start date, typically 30, 60, 90, or 120 days. Longer waiting periods are less expensive.
3 "types" of disability insurance
- Own occupation: pays a benefit if you are unable to perform the duties of your regular job for which you are highly trained or skilled due
to an illness or injury. Own Occupation is the most expensive type of disability insurance because it allows you to earn a tax free benefit even if you are still
gainfully employable. For example: a surgeon loses the use of his or her hand and is no longer able to work as a surgeon. He or she would collect a disability benefit even if they were employed somewhere else.
In short, with an Own Occupation definition of disability, you are insuring your specific job or career.
- Regular occupation: pays a benefit if you are unable to perform the essential duties of your current job due to disability or illness, and are not gainfully employed elsewhere.
Benefits cease when you are able to work again up to full capacity. For Example: An office worker who injures his back would collect a full benefit for missing over a month of work, and a partial benefit
thereafter as a percentage of their full wage, as they are eased back into a full time roll. Regular Occupation is less expensive than Own Occupation, and recommended to people who do not qualify for an Own Occupation disability policy.
- Any occupation: provides you with a monthly benefit only if are unable to perform the duties of any occupation whatsoever. This definition of disability is strict. To receive benefits,
you have to be unable to work in any job. Occasionally, however, the wording is modified to take into consideration your earning level, education, training, and experience. Any occupation is a good entry
level disability insurance feature, until you are eligible for regular or own occupation. It is often used to define the Waiver of Premium rider on a life insurance policy.
Quick Tip: When shopping for a personal disability policy always ask yourself: "How much can I afford to protect my future income, past training and education?"
Feel free to ask for assistance from a licensed broker to ensure you are making the right decision.