Disability Income Insurance Questions & Answers

January 1, 2010


Questions about low cost health insurance, short term medical insurance and other related benefits are addressed by OnlineAdviser service                Back to Index of all Questions & Answers

Importance of disability Income Insurance

Features of disability income insurance

Cost of disability income insurance

Disability during pregnancy

Online application for disability income insurance

Waiting period for disability income insurance


Importance of Disability Income Insurance

Q: Why do you say that disability income insurance is more important than major medical insurance?


A: A person with inadequate major medical insurance might lose some sleep over unpaid bills and, worst case, could eventually wind up dealing with a collection agent to settle the unpaid bills. But everyone has access to basic medical care regardless of insurance.

In contrast, a person without adequate disability income insurance can easily wind up losing the major components of their lifestyle. Disability is the leading cause of home foreclosures and personal bankruptcies. The incidence of divorce following uninsured disability is very high and chronic disability is also linked to long term mental illness. In short, a lack of adequate disability income insurance can ruin your life more easily than unpaid medical bills.


Features of disability income insurance

Q: What features should I look for in a disability insurance policy?

A: The single most important feature is how the policy defines disability. A common definition is "an illness or injury that prevents the insured from doing the substantial and material duties of their own occupation", however some coverage, including social security disability insurance, substitute the term "any occupation". This tiny change makes an enormous difference in the benefit that the policy offers. Other important features are how the policy defines and covers "partial disability" and the treatment of disability resulting from pre-existing medical conditions.

Beyond that, insurance can be customized to fit individual needs and budget by varying standard options like waiting period (we usually suggest 60 days because most people cannot survive financially for more than a few months without earned income) length of coverage (we usually suggest 2 years to best coordinate with social security benefits).  Some people pay extra to have all of the premiums returned in the event that they have no substantial disability claims by the date of retirement.

Finally, consider a policy that uses a simplified issue process and fast underwriting. Some disability insurance companies advertise low rates and attractive features but the majority of applications are not approved. Of course, this just results in wasted effort. A simple issue policy can have the entire process completed within a week without the need for medical records or a personal medical examination.


Cost of disability income insurance

Q: How much does disability income insurance cost?

A: The price depends primarily on your occupation (office work vs. physical work), your income and your age. For most people, the price of this insurance is a small fraction of the price of major medical insurance; typically 2% to 3% of income (as compared to 10%+ of income for major medical insurance). For example, assume a thirty-something in some office position making $40,000 per year. The cost of disability income insurance coverage might be about $70 per month.


Disability during pregnancy

Q:  Is pregnancy a disability?

A: A normal pregnancy is not considered a disability but complications of pregnancy may result in disability covered by an insurance policy.


Online application for disability income insurance

Q: Can I apply online for disability income insurance?

A: You can obtain an application online at MedSave.com but the application must be downloaded, printed, completed manually and returned by e-mail, fax or mail. Direct online enrollment is not offered yet for disability income insurance.


Waiting period for disability income insurance

Q: When do benefits start of a disability income policy?

A:  The income is paid after the disability has lasted longer than the "waiting period". The waiting period is similar to a deductible on other types of insurance policies in that it lowers the price of insurance. Common waiting period options are 30 days, 60 days, 90 days and 180 days.

The financial planning issue with regard to high blood pressure and osteoarthritis is not the current cost of treatment (which is usually minimal) but the more serious medical conditions may develop over the long term. So you are wise to be less concerned about pre-existing condition coverage in the short term but rather focus on the stability of your health insurance coverage over the long term. If you expect to be eventually covered by a group health insurance plan, then a low cost short term medical insurance that excludes pre-existing condition coverage is perfect in this situation.

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