Disability Insurance Policy Information

There are many different provisions, features and optional riders that consumers should understand and compare when purchasing disability insurance. The list below provides an explanation of the most commonly used terms in a disability insurance policy.

Non-Cancellable & Guaranteed Renewable: If your policy is non-cancellable and guaranteed renewable, it means the insurance company cannot cancel your policy, change your premiums, or modify the provisions of the contract until you reach age 65. Additionally you are able to renew your policy, as long as you continue to be gainfully employed and satisfy the requirements set forth by your contract.

Definition of Disability: This provision describes the circumstances in which a person may qualify for a total disability claim. For more information visit definition of total disability.

Optional Policy Riders: These are optional benefits that can be added to a disability insurance policy to enhance the quality and level of income protection being provided. For more information visit disability policy riders

Occupation Class: Occupation classes are a basic system that insurance companies use to categorize the risk of insuring specific occupations. Each company will have their own guidelines but generally, less risky and higher paid professionals will have a preferred occupation class. The occupation class you qualify for will have an affect on both the pricing of your coverage as well as the provisions and optional riders available.

Elimination Period: The elimination period is the number of days that must elapse before disability benefits become payable. Most companies provide the option of 30-day, 60-day, 90-day, 180-day and 365-day elimination periods. The 90-day elimination period is normally the most cost effective and also the most commonly used option.

Benefit Period: The benefit period is the period of time for which an insurance company will pay benefits for a disability claim. Once the benefit period is exhausted, benefits will terminate. Depending on the insurance company you work with, you could choose a 1-year, 2-year, 5-year, 10-year, to age 65, or to age 67 benefit period.

Monthly Benefit: The monthly benefit is the amount that the insurance company will pay you for each month of Total Disability. The benefit will begin once the elimination period has been satisfied. Most insurance companies allow a person to insure up to 60% of their income. For higher paid professionals – the higher your income, the lower the percentage of your income can be covered.

Total Premium: The premium is the amount a policyholder must pay the insurance company in order for coverage to remain effective. Most companies allow payments to be made in 4 different frequencies: monthly, quarterly, semi-annually or annually. Normally it is less expensive to pay premiums on an annual basis than any other frequency.

Exclusions & Limitations: The exclusions and limitations section of a policy will address specific circumstances in which benefits will either not be paid or will be paid on a limited basis. Every company will have a list of general exclusions, which are included on every policy they issue and can normally be found in a disability proposal or quote. The most common limitation seen in policies today is a 24-month Mental and Nervous benefit limitation. This will limit benefits to a 24-month period for all disabilities related to mental or nervous disorders.

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