Health Insurance Blog

‘The inability to perform the material and substantial duties of your regular occupation, the insurance company will consider your occupation to be the occupation you are engaged in at the time you become disabled, they will pay the claim even if you are working in some other capacity.

This has become the most common definition of total disability in the industry today. Most insurance carriers that have stopped offering own-occupation disability insurance have moved to an income replacement definition. You will find the first part of the definition is very similiar to an own-occupation definition, but it is with the second part that the major change occurs.

A typical income replacement definition will look something like this: Because of sickness or injury you are unable to perform the material and substantial duties of your occupation, and are not engaged in any other occupation.

As there is a major difference between an income replacement and an own-occupation definition of total disability. The income replacement definition will penalize you during a claim if you make the decision to go back to work, or earn another source of earned income while on a claim. if somebody wants to go back to work in some capacity, the insurance company may offset your monthly benefit check.

There is a common misconception that own-occupation disability insurance costs a lot more than an income replacement policy. While I am certain that in some scenarios this is true, as a blanket statement it is false. There are many professional occupations where an own-occ contract is actually less expensive than an income replacement policy. Many companies, as an example, do not like writing individual disability insurance on physicians.

It is very likely that an own-occupation disability insurance policy may be less expensive from a company that still enjoys writing disability insurance for doctors.Families dangerously underestimate their vulnerability… and they dangerously overestimate their coverage,” said Karen Ignagni, president of AHIP, Washington.

About 58% of Americans believe that they have disability coverage, even though only 35% actually do, Ignagni said. AHIP has set up a Web site to educate consumers about the risks they face at http://www.yourincomeatrisk.org AHIP also is trying to contribute to the general body of knowledge about disability and disability insurance, by releasing a policy brief and a survey report addressing disability issues.

In 2005, private disability insurers spent an average of $3,200 on each disabled employee receiving rehabilitation and return-to-work services, Beal writes. There are three basic types of renewability on the market today. Non-Cancellable and Guaranteed Renewable Guaranteed Renewable Conditionally Renewable elimination period is a fairly easy choice to make.

The elimination period is the period of time between the onset of a disability, and the time you are eligible for benefits. It is best thought of as a deductible period for your policy. For an individual disability insurance policy the industry has made the most attractive offer a 90 day elimination period. They will charge you with an extremely high rate if you choose to go with a shorter elimination period of 30, or 60 days. They will give you a price break if you can go longer than 90 days.

While the cost of having a shorter elimination period is much higher, you will find that going with a longer elimination period does not save you much money at all for the risk you take on. It is my opinion that insurance carriers set it up so that the logical choice is a 90 day elimination. Most options past 90 days are 180, 365, and 720 day elimination periods. It is important that you understand once the elimination period has been satisfied, you receive actual benefit checks at the end of the month. In reality, a 90 day elimination period means you are four months away from getting any claims dollars on a disability insurance claim.