Disability Insurance Flashcards
what is disability income insurance?
provides income to the insured in the event the insured is unable to work because of illness or injury
any occupation
- considered disabled if insured cannot perform the duties of any occupation
- least expensive premium
modified any occupation
-disabled if unable to perform duties of gainful occupation they’re reasonably fitted by education, experience, and prior economic status
own occupation
- disabled if insured cannot perform the duties of his own occupation
- more expensive
- ideal for specialized, high-paying fields
split definition of disabled
begins with own occupation, and moves into modified any occupation after a year or two under the own occupation definition
short-term benefit period
coverage is for 2 years or less
long-term benefit period
coverage is until normal retirement age, death, or a specified period of time
elimination period
- amount of time until benefits begin
- premium is waived during this period
- elimination period serves as a deductible
taxation of premiums and benefits: if employee pays the premiums with after-tax dollars
- premiums are not deductible
- benefits are tax free
taxation of premiums and benefits: if employer pays the premiums
- premiums are deductible to the employer
- benefits to employee are taxed
taxation of benefits: if employee pays premium with pre-tax dollars
-benefits to employee are taxed
cost of living rider
benefits received will adjust for inflation, maintaining the insured’s purchasing power
residual benefits
if insured goes back to work at less pay, then the policy will pay the difference between current income and income prior to disability
integrating with Social Security
any disability benefits received by Social Security will reduce the amount of disability benefits paid by the insurer
probation period
the time the insured must wait after the policy is issued before specified conditions are covered
(typically 15-30 days after inception)
