When was the last time you took an 8 week vacation?
How about 10 weeks? How about 30?
"Man," you say, "my company wouldn't keep paying me for that long!" And you're right. Most wouldn't. But now suppose an accident forced you to miss work for 10 weeks or longer. Could you count on your firm to take care of you? What would happen to your family when those paychecks stop? If your company provides you with disability coverage as a benefit, then you can rest easier.
Or can you?
Perhaps your firm offers coverage as part of your benefit package. Many good companies do, either with short-term coverage, long-term, or both. If not, you may have purchased a disability policy of your own.
There are some things you need to know, however. Many group disability policies aren't worth the premiums that are paid, because of very limiting language in the policy. You could find your false sense of security shattered in the event that you can't work.
What to Look For:
The way that disability policies are written can be confusing. Here are some of the provisions that you should focus on to determine just what you have (or are considering buying).
1. The Renewability Provision
This is one of the key provisions of the policy and defines your rights when it comes to keeping the policy in force. If a policy is "Guaranteed Renewable" only, the company cannot cancel the contract for any reason as long as you pay the premiums (usually up to age 65). They can, however, increase premiums. If the policy is both "Guaranteed Renewable" and "Non-Cancelable", then the company cannot cancel, change, or raise the contract price. This is what you want.
2. Definition of Total Disability
There are three ways to classify disability: "Own Occupation," "Modified Own Occupation," and "Any Occupation."
- Own Occupation
This one pays if you cannot perform your normal occupation. This is the friendliest definition to you because it will continue to pay even if you find another job, as long as you can't perform the normal duties of your previous job (and your new job isn't just like your old one). Ideally, you should get the policy with the longest "Own Occ" period available.
- Modified Own Occupation
This one says that it will pay if "you are unable to perform the substantial and material duties of your occupation, and you are not working." This type policy has become the most prevalent.
- Any Occupation
This one is the most restrictive. It pays only if you are unable to work in any occupation in which you are reasonably suited by education, training, or experience. If you have any education or experience at anything, you aren't likely to collect much from this type of policy.
As with so many financial products, you should always go into a contract with your homework done. Nothing infuriates people as much as paying an insurance company for years, only to find out that they don't have what they thought they did, at crunch time.
In my opinion disability insurance is one of the greatest values on Earth. If you ever need it, you'll agree with me. Just make sure that the coverage you want to have in place is what you really have.
Until next time,
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Insurance and annuity products are not sold through Virtue Capital Management, LLC (“VCM”). VCM does not endorse any annuity or insurance products nor does it guarantee any annuity or insurance products performance.