1. What does disability insurance really provide for?
A. Disability insurance provides for replacement of your individual income during periods in which you cannot earn a living or provide for business expenses to be paid whether you are working or not.
2. What is the relationship between long-term care insurance and disability insurance?
A. Long-term care insurance is an outgrowth of the concept of disability insurance coverage.
3. Is it possible to obtain disability insurance coverage in conjunction with long-term care insurance?
A. Some disability carriers have developed long-term care policies as a result of their experience in the disability insurance market over the years.
4. Are there any other benefits provided with disability insurance regarding long-term care?
A. In some cases, long-term nursing care coverages are provided as riders to disability policies.
5. Does disability insurance coverage continue after 65 years of age?
A. Some disability policies will provide coverage even after age 65 years if the person continues to be gainfully employed.
6. Does disability insurance have any advantages if I don’t qualify for long-term care insurance?
A. Some disability insurance policies can be converted to a long-term care insurance policy, avoiding the necessity of qualifying for a long-term care policy.
7. Why is it necessary to buy an individual disability insurance policy?
A. Disability insurance is designed to replace a portion of your income should you become partially or totally disabled.
8. Is disability insurance an individual’s sole responsibility?
A. No! Your employer may provide a group policy, but you may also be able to obtain individual coverage.
9. Is it necessary for an individual to carry an individual disability insurance policy along with group disability insurance provided by an employer?
A. Although it isn’t necessary for an individual to carry individual disability coverage along with group disability coverage provided by an employer, however, this would provide substantial protection to maintain your lifestyle.
10. What determines the need for disability insurance?
A. To determine the need for disability insurance ask yourself two questions:
• How long can I survive financially without any income if I become disabled?
• How will I pay my rent or mortgage and other living expenses should I become disabled?
11. What is the likelihood that I or anyone else would benefit from disability insurance coverage?
A. Consider these sobering statistics:
• 2 out of 5 workers age 45 and up will be disabled 90 days or longer before retirement.
• Nonfatal workplace injuries and illnesses occurred at a rate of 4.6 cases per 100 equivalent full-time workers among private industry employers in 2005, resulting in a total of 4.2 million nonfatal injuries and illnesses in private industry workplaces.
• 16.9 million working-age Americans, or 10.1 percent of the population who are 16 to 64 years old, have a work disability (a limitation in the amount of work they are able to perform, due to a chronic condition or impairment).
• Only 28 percent of totally disabled workers qualify for Social Security benefits. In order to receive Social Security you must be so severely impaired that you cannot perform ANY substantial gainful work, and this impairment must be expected to last at least 12 months or result in early death.
12. What are the advantages provided with group disability insurance policies?
A. With group disability insurance policies the advantages are:
• Can cost less than individual disability coverage;
• Does not require medical questionnaires, as are required for individual coverage;
• Can be provided by your employer, or in some cases can be purchased individually through an employer. In the latter case, each employee can decide the amount of coverage to purchase and it can be automatically deducted each month;
13. Are there disadvantages with group disability insurance policies?
A. Yes! The disadvantages with group disability insurance policies are:
• Have more restrictions than individual policies on when benefits will be paid;
• May no longer cover you if you leave that employer, although you may be able to convert to individual coverage;
• Normally can be discontinued on 30-60 days notice to the employer or association sponsor.
14. Can you list the advantages of individual disability insurances policies?
A. The advantages of individual disability insurance policies are:
• Provide coverage that cannot be terminated if you change employers, as long as you pay the premiums;
• Provide access to benefits more easily than group contracts, in most cases;
• Can be purchased in addition to group coverage, so that you more fully cover your income;
• Can provide coverage for business overhead expenses, if you as the manager or owner are disabled.
15. Are there any tax implications with group disability insurance policies?
A. Yes! The tax consequences of group disability insurance policies are:
• If the employer pays for the coverage, the employee is not taxed on the amount of the premiums, but does pay tax on any benefits collected under the policy;
• If the employee pays for the coverage with a monthly salary deduction, the employee pays taxes on the money used to pay the premiums, but not on benefits collected under the policy.
16. What are the tax consequences for individual disability insurance policies?
A. The tax consequences for individual disability insurance policies are:
Individual disability insurance policies purchased with after-tax dollars by the insured will provide the disability benefits on an income tax-free basis;
Premiums for business overhead disability policies are normally deductible as an ordinary and necessary business expense and any benefits that are paid out are normally offset by any expenses incurred by the business during a period of disability for the owner of the business, so no tax is due on benefit payments;
Depending on the structure of the individual disability plan provided for the employees of a small corporation, it is sometimes possible to arrange the payment of the premiums on a tax-free basis;
Corporations can specify that only certain individuals receive these benefits to the exclusion of other employees, but the corporation will still receive tax benefits.
17. Are there variations in insurance policies?
A. Yes! There are variations among disability insurance policies.
18. Is there a professional recommended for assistance regarding issues concerning disability insurance coverage?
A. Yes! You should review disability insurance policies with an experienced insurance advisor.
19. What questions should I be prepared to ask before purchasing a disability insurance policy?
A. These are some questions to ask about disability insurance:
When will the benefits start paying if I am disabled?
How long will the benefits last?
Under what circumstances can I access benefits (what kinds of health conditions and how severe)?
How will the benefits and the premium cost interface with state and federal disability programs?
Is it possible to extend the coverage beyond age 65 if I continue to work?
Can I increase the coverage through a guaranteed benefit option later on?
Does the policy provide an inflation-adjustment rider that I can purchase?
What kinds of serious health conditions could prevent me from getting coverage? (Some companies will decline certain illnesses and other companies will not. Once a decline shows up on your medical insurance record, it becomes increasingly difficult to get coverage elsewhere.)
What percentage of my income will the policy pay if I am disabled?
Will I be covered the same whether disability is due to illness or and accident?
What is the definition of partial or part-time disability due to an accident or injury, where I am able to work part-time?
Is the policy directed to my occupation (i.e., if I am a surgeon and can no longer practice surgery, but can teach at a local hospital, will I receive the benefit or a portion of the benefit up to age 65)?
Is the policy guaranteed renewable as long as I work?
20. Does the Government provide disability insurance coverage and/or benefits?
A. The federal government will provide benefits if you are no longer able to work and are permanently and totally disabled.
21. Does the federal government pay disability benefits to every individual regardless of their circumstances?
A. The federal government will pay benefits for a single person and a married person with dependents.
22. How much are the federal governments benefit payments for those individuals who are totally and permanently disabled?
A. Federal payments can average $700 per month for a single person and up to $1,200 for a married person with dependents.
23. How does an individual qualify to receive disability payments from the federal government?
A. Disability payments from the federal government are based upon age at the time of disability, the number of years the person has been gainfully employed and the average income over that period of time.
24. Are there any disability benefits provided at the state level?
A. Yes! Benefits provided by the state are governed by each individual state’s disability program.
25. Are disability benefits from the states similar to those disability benefits provided by the federal government?
A. No! Individual state disability programs provide disability benefits based upon the payments made by your employer and yourself over the years of your employment.
26. Where do I obtain more specific information regarding federal and state disability benefits?
A. There are two ways to access more specific information:
You can go to the government website: www.ssa.gov,
You may call directly: 800-772-1213.
27. How difficult is it to qualify for federal and state disability benefits?
A. It is very difficult to qualify for federal and state disability benefits and you must be totally disabled for nine to twelve months, in most cases.
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