CFP - Disability Insurance Flashcards
What is DISABILITY INSURANCE?
Provides income to the insured in the event the insured is unable to work because of illness or injury (accident)
Disability Insurance term
Retirement or Death
Disability insurance Elimination period
Amount of time until benefits begin
During the elimination period, typically the premium is waived
Typically 0 to 180 days
Disability insurance - taxability of benefits?
Depends on payor:
If EMPLOYEE pays the premium with AFTER-TAX dollars
Premiums NOT deductible BUT Benefits are tax free
If EMPLOYER pays the premium
Premiums ARE deductible to the Employer AND benefits to the Employee are TAXED
If EMPLOYEE pays the premium with PRE-TAX dollars
Benefits to employee are TAXED
Disability insurance - ideal amount of benefits?
60-70%
Definition of disability “any occupation”
Considered disabled if insured cannot perform the duties of “any occupation”
This definition provides for the least expensive premium
Definition of disability “MODIFIED any occupation”
Considered disabled if insured cannot perform the duties of gainful occupation they’re reasonably fitted by education, experience, training, and prior economic status
Definition of disability “OWN occupation”
Considered disabled if insured cannot perform the duties of his “own occupation”
More expensive, ideal for specialized, high paying fields
Definition of disability “split definition”
Begins with own occupation, and move into modified any occupation after 1-2 years under the own occupation definition
Disability Insurance - Short Term
Coverage is for two years or less
Disability Insurance - Long Term
Coverage is until normal retirement age, death of for a specified period of time
Disability Insurance - Cost of Living RIder
Benefits received will adjust for inflation
Disability Insurance - Residual Benefits
If insured goes back to work at less pay, policy will pay the difference between current income and income prior to disability
What happens if the insured receives disability benefits through Social Security?
reduces disability benefit paid by the insurer
Disability Insurance - Probation Period
Is the time the insured must wait after the policy is issued before covered, typically 15-30 days after inception
