Palmyra Health Care and Disability

Long-term Care Insurance

As we get older, we need to think of issues that seemed unimportant or even unrealistic when we were young. When we start awakening to the natural course of life, we also realize that we have to prepare for possible hardships the old age may bring. The good news is that the life span of our citizens increases, but as the time machine has not been created yet; the expended life-time might mean the extension of the years of illness and disability rather than of the years of youth and vitality. According to statistics, one out of every two people will need long-term care at some point of their life, and about 60% of individuals over age 65 will require some kind of special care services.

Long-term ?are Insurance (LTC or LTCI) is an insurance product which helps to pay for the cost of long-term care when you cannot care for yourself. Long-term care provides the assistance an individual may need if he/she has some disability or a chronic illness which makes it impossible to care for oneself. Inability to care for oneself means inability to perform the activities of daily living (ADLs), which are eating, toileting, continence, transferring, dressing, bathing, and walking. It can be the result not only of old age, but also of mental or physical illness, or injury. The most common cases associated with long-term care include cancer, a stroke, Parkinson's, Alzheimer's disease and disability. A person is said to need "long-term care" in case he/she is unable to do two or more of these basic activities, or in case he/she suffers a cognitive impairment.

Long-term Care Insurance covers the costs of help in your home with daily activities like bathing, dressing, eating and cleaning, visiting nurses, or care in a nursing home; assisted living services, such as meals, help with daily activities, health monitoring etc, that are provided in a special residential setting; services in an adult daycare center etc. A long-term insurance policy also provides for an opportunity to make your own choices about what long-term care services you will receive and about the place where you will receive them.

Age, however, is not the crucial factor when it comes to long-term care. About 40% of people who receive long-term care services are between 18 and 64. Of course, older people tend to use the most long-term care, but a young or middle-aged person might also need such services due to an accident or a serious illness.

There are two categories of long-term help people may need: custodial or personal care and skilled nursing care or rehabilitation. Custodial care is a help with the activities of daily living for disabled people, and supervision, protection and help with everyday tasks for people with cognitive impairments. Skilled nursing care can be provided either in the home or in a nursing facility and refers to medical, nursing, or rehabilitative services.

LTCI covers care expenses which are usually not covered by your ordinary health insurance, Medicare, or Medicaid. Health insurance does not cover nursing home care. Medicare won't pay for custodial care and has certain eligibility requirements for skilled nursing care. Individuals, who are over 65, should not rely on Medicare or private health insurance for long-term care. As for Medicaid, it is a welfare government program for very poor people, which is not meant to cover long-term care costs for those who don't qualify.

Most people rely on their family members for support and care, however, Long-term Care Insurance may be a much better option in terms of compensating your expenses. The cost of providing long-term care services may be enormous, and having insurance to help pay for it is very valuable. Long-term Care Insurance is designed to protect your family's finances and your own assets and savings, since long-term care services go beyond medical and nursing care and can be very expensive. Besides protecting your assets, it also helps minimize your dependence on family members, as well as control the place and process of receiving long-term care services.

Long-term Care Insurance is not beneficial for everyone. First off, it is rather expensive. You need to make sure you can afford paying the premiums in case your income lowers. Long-term Care Insurance, just like all other insurance products, requires you to pay regular premiums. This, in its turn, ensures that you won't pay a huge amount out of your own pocket in the event of a serious condition. Purchasing a policy with high premiums cost that are likely to lower your standard of living and cause some financial hardship can hardly be called beneficial. It takes a thorough financial analysis to determine whether Long-term Care Insurance is appropriate in a particular situation. Besides making a financial analysis, consumers need to analyze the reasons for buying a policy, as well as their ability to pay for it every year for the rest of their life. Thus, Long-term Care Insurance is recommended for people with significant assets who wouldn't like to burden their family with nursing home bills.

The risk that a person will need a nursing home care increases with age. A lot of people don't think about it until they get into their 70s and start experiencing health problems. However, in case you have current health problems that are likely to result in the need for long-term care, insurance companies won't offer you a policy, as in this case there is a high risk of losses for the insurance company. In case they still decide to sell you the policy, the premiums are most likely to be extremely high.

Probably the best time when you are most likely to be eligible to purchase Long-term Care Insurance is your middle-age. At this stage, the premium costs will be lower. In case you buy a policy after 65, you may not pass the medical tests and the premiums will be higher.

You cannot buy Long-term Care Insurance when you need to use it, i.e. it is too late to purchase it when you are unhealthy. Therefore, it is important to consider the necessity of this insurance beforehand. Take into consideration your health condition, your age, income and overall financial situation and perspective, and discuss it with your family members. If it happens so that you may need the extended health care, Long-term Care Insurance will protect you, as well as your loved ones.

Lifespan of Americans is known to have increased nowadays, and senior citizens strive to stay healthy and active as they age. However, the older we get the more extensive health care we need. Though staying forever young remains a dream unattainable, living a long and safe quality life at peace with yourself is quite an achievable goal. Besides common measures you can take to stay fit longer, like sticking to a balanced diet, taking enough exercise, not practicing pernicious habits, maintaining a positive attitude and having regular checkups, there are some other things to help you age beautifully.

What is Medicare Program?

Medicare is a federal health insurance program designed for citizens or permanent residents of the United States of America of 65 years of age and older, as well as for individuals under 65 who have certain disabilities, i.e. suffer from End-Stage Renal Disease (permanent kidney failure). This program is administered by the Health Care Finance Administration (HCFA) and the U.S. Department of Health and Human Services (HHS).

Medicare program became a law on July 30, 1965 at the bill-signing ceremony when former President Harry S. Truman was enrolled as the first Medicare beneficiary and received the first Medicare card from President Lyndon B. Johnson.

According to statistics, in 2005 Medicare ensured health care coverage for 42.6 million Americans. By 2031, the time when the baby boom generation is fully enrolled, the number of Medicare beneficiaries will most likely have reached 77 million.

Parts of Medicare

At present, there are four parts of Medicare program:

Part A is Hospital Insurance, which helps pay for inpatient care in a hospital, hospice, and some health care or nursing facility following hospital care. Since most people (or their spouses) worked for at least 10 years in Medicare-covered employment and paid taxes, this part of Medicare program is normally provided free to the eligible member.

Part B is Medical Insurance, which covers physician and outpatient hospital care and some other medical services, such as lab tests and x-rays. Part B of Medicare is basically meant to fill some gaps in medical insurance coverage of Part A. Part B is optional, and you have to pay a monthly premium if you enroll. The sum of the premium varies and there is an annual deductible. Part B will pay 80 percent of Medicare and you remain responsible for the other 20 percent of the Medicare charges.

Part C is Medicare Advantage (Medicare + Choice), which means that a person covered by Medicare Part A and B can get their health services through some provider organization at their choice. In other words, if you are entitled to Medicare Part A and enrolled in Part B, you can choose to switch to a Medicare Advantage plan. Private Health Insurance companies often enter into contract with the federal government to offer Medicare benefits by means of their own policies.

Part D is Drug Coverage, which pays for drugs your doctor may prescribe you. It is a sad fact that many senior Americans cannot afford to properly follow their doctors' prescriptions, as medications are notoriously expensive today. Though the elderly citizens make only about 15 percent of the U.S. population, they fall at about 40 percent of America's prescription drug costs.

Thus, Medicare Drug Coverage protects members who tend to have very high medication costs as well as covers from unexpected prescription drug bills. Since the drug benefit is not a part of the "Original" Medicare program (Part A and B), you can join a Prescription Drug Plan (PDP) or you can join a Medicare Advantage Plan (MA) or other Medicare Health Plan which provides drug coverage.

How to Sign up for Medicare

When a person who is receiving Social Security benefits becomes eligible at 65, he or she is automatically enrolled in Medicare Parts A and B. If a person is not receiving Social Security benefits before 65, he or she will be automatically enrolled on the day of application for benefits. If you are not ready to retire at the age of 65, make sure you enroll in Medicare Parts A and B when you turn 65 anyway, since your enrollment in this case won't be automatic. People wishing to be automatically enrolled in Medicare receive an initial enrollment package by mail normally three months before their 65th birthday.

Medicare program does not cover everything and it is vital to make your homework and check your policy for what is and what is not covered. Carefully read the information in your enrollment package and always have your medical bills well organized. You may wish to delay enrolling, but not enrolling at the age of 65 may result in higher premium later on.

Good health is a great asset. Radiant health has become a synonym of beauty, happiness and success, - everything people have ever strived for. We are concerned about our health, we do things for the benefit of our health, we restore and strengthen our health, and we even drink the health of people we care for. It is a universal custom to give and receive good wishes of health and well-being. Doing so, we realize that health is the most important and desired thing in life, and we generously wish our close ones good health for their lifetime.

Today, maintaining good health is getting more and more expensive. It turns out more expensive to have poor health though. Costly medical care, treatment and procedures, tests, medications, surgical and hospital treatment expenses tend to add headache to already existing health problems of a patient. Health Insurance is an efficient method to cure this headache.

You may not be able to afford expensive medical services when you fall sick without good Health Insurance. Health Insurance guarantees you that the insurer will pay the medical costs in the case you become sick due to covered causes or accidents. The US health system is practically based on Health Insurance that comes in a variety of options.

Types of Health Insurance

Most Americans use Group Health Insurance obtained at work. Usually, the employer pays a portion or all of the medical costs should his/her employee get sick. Group insurance is the least expensive Health Insurance kind. Some employers offer only one Health Insurance plan and some may offer a choice of plans. According to the Consolidated Omnibus Budget Reconciliation Act (COBRA), if you happen to change your job, you are entitled to carry your Group Health Insurance coverage with you to a new work place for the period of up to 18 months.

If you are a part-time worker or work for a small business, your employer may not offer Health Insurance, or you may find that your insurance plan is too limited. In this case, you have an option to get Group Insurance through membership in a professional association, labor union, or a club, or you can buy an Individual Policy.

There are basically two types of Health Insurance: Fee-for-Service (Indemnity) and Managed Care. Health Insurance policies may vary from low cost to all-inclusive, meeting different demands of customers. Which Health Insurance type and plan you choose largely depends on your needs, preferences and budget. Fee-for-Service is a traditional health care policy kind. As the name implies, insurance companies pay medical staff fees for each service provided to an insured patient. Fee-for-Service Health Insurance offers a wide choice of doctors and hospitals. Choosing any doctor you trust, changing doctors any time you like and going to any hospital in the country are some of the advantages of this policy type.

Fee-for-Service coverage falls into Basic and Major Medical Protection categories. Basic protection deals with costs of a hospital room, hospital services, care and supplies, cost of surgery in or out of hospital, and doctor visits. Major Medical Protection covers costs of serious illnesses and injuries, which usually require long-term treatment and rehabilitation period. Basic and Major Medical Insurance coverage combined are called a Comprehensive Health Care Plan. It is vitally important to know your insurance policy, since some services can be limited and some not covered at all.

The insurer does not pay all your medical bills. You pay a monthly premium and an annual deductible before the health plan starts paying part of your bills. After you have met your deductible amount for the year, you start sharing the bill with your insurance company. Usually, it is your 20 percent (coinsurance) and the insurer's 80 percent. Proceeding with the payment of each bill's percentage, you reach your plan's maximum. This is the time when the insurance plan will pay 100 percent of the covered medical expenses for the rest of that year period.

In order to receive payment for Fee-for-Service claims, you or your doctor will have to fill out forms and send them to your insurer. It is important to keep track of all your medical expenses, such as receipts for your medications, etc. If your major preference in choosing health care plan is flexibility and you have no strict budget limits, you should consider purchasing an Indemnity plan.

If choosing the most suitable Health Insurance plan your major goal is to minimize costs, a Managed Care plan may be the best option for you. The basic Managed Care principle is providing lower medical costs in exchange for more limited choice. There are three types of Managed Care plans: Health Maintenance Organizations (HM0s), Preferred Provider Organizations (PPOs) and Point-of-Service (POS) plans.

The major differences of Managed Care from Fee-for-Service plans lie within two facts: the number of doctors and hospitals who participate in managed plans is limited, and you have to either find out which plans include your specialists or learn which plans your specialists have already joined. The other aspect of no little significance is that in order to keep costs low, your chosen doctor is encouraged to supervise the types of services you get and might need to approve of a hospital or a specialist you have to see, thus depriving such plans of flexibility indemnity plans offer.

Health Maintenance Organizations (HMOs) plan has an advantage of low premiums. With HMOs plan, you select a primary care physician to service your health needs and refer you to other in-network providers when required. This health care plan pays benefits only when you apply to doctors and hospitals in the HMO network. Coverage for out-of-network services is usually provided only for emergencies. Preferred Provider Organization (PPO) is a combination of HMO plans and Fee-for-Service plans. Like in HMOs, PPO medical treatment is fully covered if provided by a doctor or hospital referring to the PPOs network. Insured individuals receive basic medical care and pay fixed premiums on a monthly basis.

Using PPO plan, you are not obliged to choose a primary care physician and do not require referrals in order to see other specialists. However, if you want to apply for medical treatment outside the plan's network, you will be paying more than people using health providers from within the PPO plan. Thus, with PPO plan, you will be able to choose between freedom of choice paying more medical bills yourself and an opportunity to recieve medical services at a lower cost from the network physicians.

Point-of-Service (POS) Plan:

If you decide to enroll in a POS plan, you will have to choose a primary care physician (PCP) from within the health care network who will supervise your health care. The primary care physician of your choice can make referrals to other providers in the plan and outside the network. If your physician makes a referral out of the network, the plan pays all or most of the bill. Members of POS plan can also refer themselves outside the plan. However, in this case your Health Insurance company will offer you only some portion of coverage. If you refer yourself to a health care provider outside the network and the medical services are covered by the plan, you will have to pay coinsurance.

With POS, you have more freedom and are not limited to HMO network providers only. Network care co-payments are quite low and there is no deductible. Paperwork for medical visits within the health care network is normally completed for you. However, there is a deductible for non-network care, and non-network co-payments are rather high. Employing doctors and services outside the network, you have to fill out the forms yourself, as well as send bills for payment, and keep an account of health care receipts.

Other Types of Health Insurance

Picking the right health plan for you, take into consideration some other, more specific Health Insurance types as well. They usually serve particular consumer needs and can be cheap or costly, depending on the policy. For instance, there is full-service Health Insurance, which covers all illnesses and allows treatment anywhere you choose, Catastrophic Health Insurance, Hospital Indemnity Insurance, Disability Insurance, Long-term and Short-term Health Insurance, etc. There are also Medicare and Medicaid, - federal Health Insurance programs.

Medicare is a public Health Insurance program for American retirees of 65 and over as well as for some disabled citizens. Medicaid is a federal program providing health care coverage for people with low income, disabled and families with dependent children. Each state normally determines who should be covered by Medicaid and what medical services should be provided.

Dental Insurance

For most of us, dental procedures are a necessary evil. Very few lucky people have never experienced those unpleasant feelings at the dentist's waiting room and a slight shock at seeing the bill afterwards. However, even those few lucky ones face the necessity of visiting the dentist some time or other. Dental hygiene is far from being the only factor that influences the health of our teeth. Nutrition, genetic inheritance, general state of health, personal habits and stress, - all these things have a great effect on our dental health. In the society where a smile is a mandatory "dress code," the need for purchasing Dental Insurance or joining a Dental Discount Plan does not raise doubts.

It is likely that you get your dental coverage at work. If your employer offers dental coverage, try and find out if you have several types of dental plans to choose from. Most dental plans cover a maximum of $1000-$2000 of dental services per year, and you will have to pay for the rest of the dental expenses. If your employer does not offer dental coverage, you are advised to purchase an individual Dental Insurance policy.

Basic Dental Insurance coverage falls into three major categories:

Preventive and Diagnostic Dental Care

Nearly all Dental Insurance policies cover basic dental services such as checkups, x-ray pictures, cleanings, and some other procedures preventing tooth and gum disease. Since regular dental care prevents more serious potential problems, such coverage can be rather important.

Basic Dental Care and Dental Procedures

Basic dental procedures include fillings, fixing chipped teeth, tooth extractions, periodontal treatment, root canals, etc. However, with some Dental Insurance providers, some procedures can not be listed as basics, for instance, root canals. It is up to you to select a Dental Insurance provider who covers most items of basic dental care and dental procedures.

Major Dental Care

Major dental care usually includes dental surgery, denture work, orthodontics, and other serous expensive dental procedures. Some Dental Insurance plans cover a portion of major dental care costs.

Types of Dental Plans

Dental plans are contracts between the sponsor (an employer or organization) and the third party (an insurance company), according to which you can arrange your dental treatment into the most suitable pattern. Usually Dental Insurance plans do not cover the full cost of dental care. Dental care programs have some provisions that limit the amount the insurance company will pay. Common methods of payment limitation are deductibles, co-payments, and dollar limit programs. All limitations in dental coverage are stated in your dental coverage policy and appear to be the result of an agreement between the sponsor and the third-party. An average dental plan covers 100% for preventive measures, 80% for basic dental work, and 50% for major procedures.

There are various types of Dental Insurance plans ranging from covering only most basic dental care to complete all encompassing dental procedures. Indemnity, Dental Health Maintenance Organization (DHMO), and Preferred Provider Organization (PPO) managed care programs are the basic dental plan types.

If you choose Indemnity Insurance Plans, you agree to pay your insurance company an established monthly fee (around $14 to $26 per month), while your insurance company agrees to pay your dentist for dental services carried out. The policyholder is usually liable for 20-50% of the total service costs.

Dental Health Maintenance Organization (DHMO) is a pre-paid dental care plan, in which a fixed monthly fee goes to a participating dentist by DHMO for each patient assigned to the given dentist. The Dental Insurance policyholder may have to contribute to the cost of his/her treatment. These insurance plans normally deal with preventative and emergency care, thus varying from patient to patient.

According to Preferred Provider Organizations insurance plan (PPO), you can choose to visit dentists from a preferred supplier list at a large discount. With this insurance plan, you might pay about $25 per month. If for some reason you wish to apply to the dentist who is not covered by this dental plan, you can still get some discount, but not as much as when you stick to the dentists on the list.

Point of Service Plan (POS) is a Managed Care plan according to which a patient can receive treatment from a non-participating dentist at lower benefit levels.

Direct Reimbursement (DR): Using this type of dental plan, you choose your own dentist and treatment plan. After you have paid for dental treatment you received, you can submit the receipt to your employer for reimbursement. This is a straightforward plan that allows employees to avoid the complexity of lists, deductibles and paper work. However, this dental plan is often too costly for many small businesses.

Understanding Dental Insurance is important for both your health and your budget. You should be perfectly aware of what is covered in your policy and what is excluded, how much you will have to pay, what waiting periods there will be before your coverage starts working, etc. Most dental programs do not cover dental treatment solely for cosmetic improvements. Hospitalization is not usually covered either.

You can consult with your dentist not only about your dental care, but also about Dental Insurance claims. He/she can provide you with the necessary information and you will be able to prepare the claim yourself, or your dentist will help you by filing insurance claims for you. Dental coverage is there to help you reduce your dental expenses, but only your health and expert advice should be determinant in your dental treatment decisions.

Disability is something most people do not like to think about. But the chances that you will become disabled probably are greater than you realize. Studies show that a 20-year-old worker has a 3 in 10 chance of becoming disabled before reaching full retirement age.

This booklet provides basic information on Social Security disability benefits and is not intended to answer all questions. For specific information about your situation, you should talk with a Social Security representative.

We pay disability benefits through two programs: the Social Security disability insurance program and the Supplemental Security Income (SSI) program.

Social Security pays benefits to people who cannot work because they have a medical condition that is expected to last at least one year or result in death. Federal law requires this very strict definition of disability. While some programs give money to people with partial disability or short-term disability, Social Security does not.

Certain family members of disabled workers also can receive money from Social Security. This is explained in "Can my family get benefits?"

How Do I Meet The Earnings Requirement For Disability Benefits?

In general, to get disability benefits, you must meet two different earnings tests:

A “recent work” test based on your age at the time you became disabled; and

A “duration of work” test to show that you worked long enough under Social Security.

Certain blind workers have to meet only the “duration of work” test.

The table below, shows the rules for how much work you need for the “recent work” test based on your age when your disability began. The rules in this table are based on the calendar quarter in which you turned or will turn a certain age.

The calendar quarters are:

First Quarter: January 1 through March 31

Second Quarter: April 1 through June 30

Third Quarter: July 1 through September 30; and

Fourth Quarter: October 1 through December 31

Rules for work needed for the “recent work test”

If you become disabled...Then you generally need:

In or before the quarter you turn age 241.5 years of work during the three-year period ending with the quarter your disability began.

In the quarter after you turn age 24 but before the quarter you turn age 31Work during half the time for the period beginning with the quarter after you turned 21 and ending with the quarter you became disabled.

Example: If you become disabled in the quarter you turned age 27, then you would need three years of work out of the six-year period ending with the quarter you became disabled.

In the quarter you turn age 31 or laterWork during five years out of the 10-year period ending with the quarter your disability began.

The following table shows examples of how much work you need to meet the “duration of work test” if you become disabled at various selected ages. For the “duration of work” test, your work does not have to fall within a certain period of time.

NOTE: This table does not cover all situations.

Examples of work needed for the “duration of work" test

If you become disabled...Then you generally need:

Before age 281.5 years of work

Age 302 years

Age 343 years

Age 384 years

Age 425 years

Age 445.5 years

Age 466 years

Age 486.5 years

Age 507 years

Age 527.5 years

Age 548 years

Age 568.5 years

Age 589 years

Age 609.5 years

Individual disability insurance is truly a basic concept. It is an insurance product designed to replace anywhere from 45-60% of your gross income on a tax-free basis should a sickness or illness prevent you from earning an income in your occupation. Every disability insurance policy from every insurance company is very different, this is not a product to simply shop for the most competitive rate. To buy the cheapest disability insurance policy on the market is to throw money away. The odds of getting paid a monthly benefit under a cheap contract may be significantly lower than receiving benefits from a quality contract. The goal of this site is to provide you with a resource to make an educated decision on your own. I will provide you with information regarding the major features of a disability insurance policy so that you may better understand how to read a disability insurance policy. I will also provide you with links to some third party articles, and links to the best disability insurance sites I have found on the internet to obtain quotes.

Definition of Total Disability

Every disability insurance plan has a definition of total disability in the policy, you should always know the exact language of this definition before you own anything. There are three basic types:

Own-Occupation Disability Insurance

The most comprehensive definition of total disability available. This type of policy will have a definition that says:

The inability to perform the material and substantial duties of your regular occupation, the insurance company will consider your occupation to be the occupation you are engaged in at the time you become disabled, they will pay the claim even if you are working in some other capacity.

What I have found over the years is that people will choose to fight their disabilities. They will refuse to sit at home and collect a monthly disability check. Instead, as long as they are not severely disabled, most people choose to go back to work in some capacity to give themselves a sense of self worth, or just to go do something everyday. Own-occupation disability insurance is the only plan that does not penalize somebody for going back to work in a different occupation while on a claim. Under this type of plan, the bottom line is if because of a sickness or injury you can not perform in your occupation, you will be considered totally disabled, even if you choose to do something else.

Income Replacement Insurance

This has become the most common definition of total disability in the industry today. Most insurance carriers that have stopped offering own-occupation disability insurance have moved to an income replacement definition. You will find the first part of the definition is very similar to an own-occupation definition, but it is with the second part that the major change occurs. A typical income replacement definition will look something like this:

Because of sickness or injury you are unable to perform the material and substantial duties of your occupation, and are not engaged in any other occupation.

As you can see there is a major difference between an income replacement and an own-occupation definition of total disability. The income replacement definition will penalize you during a claim if you make the decision to go back to work, or earn another source of earned income while on a claim. I have found that most people if given the choice would go back to some work if possible, under this plan if somebody wants to go back to work in some capacity, the insurance company may offset your monthly benefit check. There is a common misconception that own-occupation disability insurance costs a lot more than an income replacement policy. While I am certain that in some scenarios this is true, as a blanket statement it is false. There are many professional occupations where an own-occ contract is actually less expensive than an income replacement policy. Many companies, as an example, do not like writing individual disability insurance on physicians. It is very likely that an own-occupation disability insurance policy may be less expensive from a company that still enjoys writing disability insurance for doctors.

Gainful Occupation Coverage

This definition of total disability is very common in an employer sponsored group long term disability insurance policy, or with property and casualty insurance companies that decided to release a disability insurance policy. It is quite simply the worst definition available and should be at the very least supplemented with a quality contract if not replaced entirely. This definition basically leaves the determination of whether or not you are disabled up to the insurance company. A typical definition will look like this:

Because of sickness or injury you are unable to perform the material and substantial duties or your occupation, or any occupation for which you are deemed reasonably qualified by education, training, or experience.

Could somebody be forced to go flip burgers at McDonald's under this definition of total disability? Probably not but it does leave it open for litigation and interpretation. You should be buying disability insurance so that you do not have to worry about your income if you can't do the material and substantial duties of your occupation, going with this type of disability insurance policy is an inexperienced decision, and should be re-thought for an own-occupation plan. Many people who simply shop for the best disability insurance rate end up with this type of coverage. In my opinion, it is worthless, and you may end up with the Lemon of the disability insurance industry.

Renewability of Disability Insurance

The first aspect of any disability insurance policy one needs to understand is the renewability feature. There are three basic types of renewability on the market today.

Non-Cancellable and Guaranteed Renewable

This, in my opinion, is the strongest possibility as far as renewability goes. It guarantees you that after you place a policy in-force that there will be no changes to your premium schedule, your monthly benefits, or your policy benefits to age 65 or a certain age. The insurance company legally can not change a thing unless you want them to. Many people do not have a guarantee that their income will never go down again, under a Non-Cancellable policy even if your income goes down later in life, if you are totally disabled the company will pay you the total disability benefit you originally placed in-force. Under a Non-Cancellable policy even if you changed jobs from being a white collar, low-risk occupation to a professional weight lifter the company could not change your benefits for the worse. Quite simply, there is no reason to go with an individual disability insurance policy that is not Non-Cancellable and Guaranteed Renewable.

Guaranteed Renewable

This type of renewability feature is a step down from Non-Cancellable and Guaranteed Renewable. The basis behind the definition says that an insurance company will probably not change anything about the policy, but they can ! Almost every insurance carrier that offers a guaranteed renewable contract used to offer a Non-Cancellable and Guaranteed Renewable contract. There is a reason why they moved to this type of renewability.

They can change the premium by state, policy year, or occupational class with approval from the state. For an individual disability insurance policy, it is my opinion that you would be making a mistake by going with a GR policy. I believe you are setting yourself up for a possible disaster several years into the future. Look for the words on your policy "Non-Cancellable and Guaranteed Renewable", They may not be on the proposal, but they must be on the policy! If it is just Guaranteed Renewable, you may be missing something.

Conditionally Renewable

The worst option of the three, a conditionally renewable policy offers you as a consumer virtually no guarantees for your disability insurance policy. Different companies have different conditions for you to renew your insurance every year, but the only guarantee you can get is that the conditions will be very hard to meet at the worst possible time. Stay away from these policies!!!

Residual Disability Insurance

A large percentage of all disability insurance claims either start or end in a residual claim. The basis of a residual claim is that a person is still actively engaged in their occupation, but because of a sickness or injury is:

Suffering a loss of time and duties

Suffering a loss of income of at least 20%

As you can see there are two major types of a residual claim. One is based on a loss of income only, and one is based upon a loss of time and duties. I am under the impression that a residual disability provision which is based on loss of income is better. I want the bottom line to my residual claim to be that the insurance company will continue to pay me until my income is back up to what it was before I was disabled. Under a loss of time and duties claim they generally stop paying a residual claim once you are back to work full time. Some carriers will move you to a recovery benefit once you are back to work full time under the time and duties claims, but this is only for a specified period of time. A residual disability provision based on income is like having an unlimited recovery benefit, and protects a person from a claim like the following:

Let's assume this person is in sales, or a small business owner. Assuming they are totally disabled for a period of six months to a year, does anybody think that when they come back to work their income will jump up to what it was before they were disabled? The answer is likely to be no. They may have to come back to work for longer hours, and work even harder to get back the clients they lost while they were away, get new business in the hopper. Then maybe several months later they could hope to increase their income towards the previous level. The bottom line is that people may be residually disabled for a much longer period of time than they are totally disabled.

Presumptive Disability Insurance

The definition of presumptive disability varies among contracts. Some contracts do not even have a presumptive disability insurance provision. The basic idea of presumptive disability is to protect against drastic disabilities that occur suddenly. They generally protect you against the loss of hearing, sight, speech, or the use of any two limbs. This is not a provision for which you pay an extra premium, it is built into most contracts. The main differences are in the definition language, specifically in the words; Total, Permanent, Irrecoverable. A total loss of sight, speech, hearing, or the use of any two limbs is a lot different from an irrecoverable or permanent loss. Total losses protect you from temporary loss of site, speech, hearing, and broken limbs. An irrecoverable loss is just that, the disability must be permanent. All contracts that have a presumptive disability provision pay first day benefits for these losses.

Recurrent Disability Insurance

A recurrent disability is exactly as it sounds. You are disabled once, re-cover, then have a recurrent disability. You will find that most contracts have a recurrent disability provision built in. The average provision will say something like this:

"For a recurrent disability, within six months, from the same or related cause, the insurance company will waive the elimination period."

The recurrent disability insurance provision is designed to make sure that a person does not have to go through more than one elimination period within a certain period of time. It is important for you to know that the six-month, same or related cause definition is the generic definition. Also, a recurrent disability provision is more important than one might think. Many times people will think of this miscellaneous feature that is not as important as some of the other features like Non-Cancellable, and Own-Occupation. In my opinion it is as important, especially when you go on a disability insurance claim. For example, look for a policy that provides a 12 month recurrent clause so that related disabilities which reoccur within 12 months of a prior disability do not require a new elimination period.

Waiver of Elimination Period

I know one disability insurance company that has a 5-year waiver of elimination period provision that waives the elimination period for any cause if benefits were paid for at least one day on a disability that lasted only six months. Once something goes wrong with the human body to cause a disability, this tends to set off a chain reaction of events. Condition Y will cause the human body to develop condition X over the next few years. With a 5 year waiver of elimination period, you would not have to prove to an insurance company how one disability is related to another to waive the next elimination period. It is quite difficult on the finances to get through a three month elimination period one time, you should find a disability insurance company that offers the five year waiver of elimination period so you do not have to satisfy more than one elimination period in five years.

Disability Insurance Elimination Period

The elimination period is a fairly easy choice to make. The elimination period is the period of time between the onset of a disability, and the time you are eligible for benefits. It is best thought of as a deductible period for your policy. For an individual disability insurance policy the industry has made the most attractive offer a 90 day elimination period. They will charge you with an extremely high rate if you choose to go with a shorter elimination period of 30, or 60 days. They will give you a price break if you can go longer than 90 days. While the cost of having a shorter elimination period is much higher, you will find that going with a longer elimination period does not save you much money at all for the risk you take on. It is my opinion that insurance carriers set it up so that the logical choice is a 90 day elimination. Most options past 90 days are 180, 365, and 720 day elimination periods. It is important that you understand once the elimination period has been satisfied, you receive actual benefit checks at the end of the month. In reality, a 90 day elimination period means you are four months away from getting any claims dollars on a disability insurance claim.

Possible Elimination Periods

Longest Available720 Days

360 / 365 Days

180 Days

Most Popular90 Days

60 Days

Shortest Available30 Days

There is only one thing to watch out for

There are some policies on the marketplace that require an elimination period be satisfied with a total disability only, or with consecutive days of disability. Never own a contract that does not allow an elimination period to be satisfied with either a residual, or a total disability. Also make sure they have an accumulation period so that you can finish your elimination period in the shortest amount of time. Typically an accumulation period allows 7 months for a three month elimination period (2 times the elimination period + one month).

Disability Insurance Benefit Period

I think the first thing to go over is to define a benefit period. Try to explain what it is, and even more importantly, what it is not.

A benefit period is the period of time you are eligible to collect benefits while on a disability insurance claim. If a sickness or injury occurs that prevents you from performing the material and substantial duties of your occupation, the elimination period begins. Once the elimination period has been satisfied, monthly benefit checks will begin to come in at the end of the month. The maximum amount of months that these checks can possibly come in is your benefit period. Your benefits stop when you return to work in your occupation, or depending on the contract to another occupation making the same income.

Possible Benefit Periods

Longest AvailableGraded Lifetime

To age 67

Most PopularTo age 65

5 Years

Shortest2 Years

The most popular choice for a disability insurance policy is To Age 65. Almost 90% of the policies that I see on a daily basis are put in-force with this benefit period. The bottom line is if you are permanently disabled your last benefit check is on your 65th birthday. Obviously the lifetime benefit period will be more expensive, but often it is not much more expensive than the to age 65 policy. For those of you looking to save premium dollars on your disability insurance, a five year benefit period will cover the average length of disability which is about 3.2 years (1985 CIDTA). I never recommend a two year benefit period unless you already have another policy that has a two year elimination period.

Optional Riders for Disability Insurance Policies

Optional Riders Available

COLA - Cost of Living Adjustment

FIO - Future Increase Option

AIR - Automatic Increase Rider

Group LTD Replacement

Residual Disability Insurance

SIS - Social Insurance Substitute Rider

Cost of Living Adjustment

Often referred to as a COLA rider, this rider only kicks in if you actually go on a disability insurance claim, and then only if the disability lasts for more than one year. Depending on the percentage option you elected when you took out the policy, it will increase your monthly benefit every year while you are on a claim along with the CPI up to the maximum you elected. It is quite often the most expensive rider available on a disability insurance policy. I normally do not recommend this option to people over the age of 42. It is designed to protect you against inflation, at after age 42 you are not as much at risk for inflation as you were in your younger years. I would recommend saving your money here unless you are younger, and must have this option because a permanent disability would devastate you.

Future Increase Option

The is an optional rider offered by most carriers to protect your future earnings. Without this rider, or an automatic increase rider, there is no way to protect your future earnings. A disability insurance policy by itself only protects the amount of income that one makes at the time they take out the policy. It does not grow automatically unless you have this, or an automatic increase rider. This rider locks in/guarantees your insurability for a certain period of time (normally to age 55). So as you increase in age, and increase your income level, you can increase your monthly benefit regardless of any health changes. Usually the only thing you need to provide when increasing your monthly benefit is a copy of the most recent tax return to prove your new income level. But the most important thing this rider protects is all the money you may make in the future. The worst thing that could happen to you is to take out a small disability insurance early on in life, with no future increase option. Then ten years down the road there is a change in your health history that prevents you from getting anymore disability insurance. You'd be real upset that you did not get future increase option then.

Automatic Increase Rider

This is a simple rider that serves a simple purpose. It increases your total monthly benefit each year for about five years. Your premium will go up with this rider each year because you are buying more disability insurance coverage. Generally they give you about a 25% increase in coverage over five years. The idea is to have your coverage increase with inflation over time without you having to pay attention to it. In terms of recommending this rider, it is simply a choice for you to make. If you want your coverage to increase, then get it.

Possible Disability Insurance Exclusions

There is some fine print in many disability insurance policies that most agents will not address with you. Every disability insurance policy does not have the exact same fine print, so again, it is vital that you read through a specimen disability insurance policy before purchasing a plan.

2-Year Max for Mental & Nervous

This is the most common exclusion within a disability insurance policy. Not every company has this exclusion within the policy, there are companies that put no limits for claims caused by mental and nervous disabilities. Basically if you own a contract with the 2-year mental and nervous exclusion, if your disability is caused by stress, anxiety, depression, Dementia, or any other mental-nervous disorder you may very well be limited to a two year benefit period.

1-Year Max for Alcohol & Drug Claims

This is the exclusion that scares me the most. Nobody, and I mean nobody knows if they will ever become dependent on drugs or alcohol. Most of the drug related claims that I have seen do not come from cocaine, heroin, or marijuana. They come from addictions to prescription medications such as Codeine, Percocets, and others. Alcoholism is also so widespread, and can ruin somebody's career at any age. Some claims I have seen with alcoholism came from a severe life event. Since many policies have a one year maximum benefit period for drugs or alcohol, and even more policies have no exclusion for it, why risk anything here?

Exclusion for payment of claims if caused during a crime

This is a fairly common exclusion, if you are disabled while committing a felony the disability insurance policy does not pay a claim.

Act of War

There are some disability insurance policies on the marketplace that do not pay claims for disabilities that are a result of an act of war. This is not extremely common, but it does exist in some contracts.

How to Buy Disability Insurance

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Nearly one-third of U.S. workers will become disabled at some point in their career before reaching retirement, according to a 2009 estimate from the Social Security Administration. Yet the federal agency says that 70% of employees aren't covered by private long-term disability insurance. Social Security disability benefits are available for certain disabled workers, but the average payout is only 40% of a person's income and the allowance rate for initial claims can be as low as 30% in some areas of the U.S.

Making up for the rest of that income is possible, but there's a price. A 35-year-old healthy male who earns $100,000 in salary can purchase an individual disability policy with an annual benefit of $60,000 until age 65 for about $1,350 a year, according to the Guardian Disability Insurance Brokerage.

Here's how to check your options for additional paycheck protection:

Short- vs. long-term makes a difference. Short-term disability, also known as sick leave, starts as soon as you're unable to work due to illness, injury or the birth of a child. Forty-seven percent of U.S. employers offer short-term coverage and 40% provide long-term disability, according to industry trade group LIMRA. Some states, such as New York and California, require a minimum level of short-term benefits. You can read buying tips and ways to compare policies here and here.

Know what you already have. It's important to determine your short-term coverage before going to purchase a long-term policy. All policies include an "elimination period," which is the amount of time from when you become disabled to when benefits kick in. Think about this as you would view any insurance deductible. You don't want to pay higher premiums for a shorter waiting period of 30 days if you have six months of short-term coverage.

Know how much you need. Long-term policies typically last for a set number of years or until you reach retirement age. The shorter the benefit period, the lower the premium. You should also check whether you can keep coverage if you leave your employer. This is known as portability.

Determine how much coverage you need. A typical long-term group plan will replace up to 60% of your salary. If your employer pays all or even a portion of the premiums, that's likely your best option to start with. You can calculate how much you might need here or here.

Drawbacks to group plans. Group plans usually only cover salary; no commissions or bonuses unless that is considered part of your core compensation. Some group plans are capped at $5,000 a month, or $60,000 annually. And if you pay premiums on a pre-tax basis from your paycheck, you will be taxed later on the benefit payout.

Age matters. Younger workers might want to check rates with an insurance agent before buying through their employer's group plan. In the individual market, age and health status dictate the premiums.

Read the fine print. Understand the difference between "own" or "any" occupation. Consumer advocates recommend a policy that's triggered when you can't do your specific job, not just any work. This is known as "own-occ." An "any-occ" definition is less desirable and is based on being unable to do "any" work given your training, education and experience.

Protect yourself. Make sure the policy cannot be cancelled, known as "non-can," and that renewal is guaranteed at the same premium as long as you pay on time.

Accidents AND illness. Some policies limit payouts to accidents and not illness. Consumers mistakenly think serious accidents are the overwhelming reason for a long-term disability when common chronic diseases play a bigger role. Only 9% of long-term disabilities were caused by injuries in 2009, according to the Council for Disability Awareness. Calculate your odds of missing work for months or years at this site and check out the leading causes of disability.

What not to do when looking to buy disability insurance.

Don't forget to ask about riders. Riders for cost-of-living adjustments or a future purchase option can allow you to increase coverage as they earn more money without taking another physical or referencing your medical records.

Don't buy a policy before checking the insurer's financial strength. Major credit-rating agencies such as Standard & Poor's and A.M. Best offer company reports.

Don't just accept the insurance company's decision on coverage limits. Those with more variable income may be surprised at premiums and level of coverage, however particular occupations and risks are covered uniformly. More than three years of business records should clear up any questions about income levels and variability.