Disability Insurance: Determining Your Risks

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Aug 15, 2017

Just like any insurance, the thought of ever having to make a claim against your disability insurance is unpleasant. That’s why many of us feign ignorance and procrastinate the task of purchasing it. Well, it’s time to stop putting it off and start planning for the possibility of disability.

Protecting you and your family against deep financial troubles is an important item to check off your to-do list and you shouldn’t wait. The peace of mind that follows will more than make up for the few minutes it takes to get your insurance needs (and your family’s future) squared away.

Defining Disability Insurance

Should you become sick or injured and are unable to work for an extended period of time, disability insurance helps to replace a portion (on average, 60%) of your income.

When researching disability insurance, it helps to know the definition of a few common terms:

  • Any Occupation Disability: Disability determined by whether or not an employee can work at any occupation he or she is qualified for by education, training, or experience.

  • Automatic Increase Benefit: A policy provision that increases the benefit amount on an annual basis to keep pace with cost-of-living increases.

  • Benefit Period: The maximum amount of time the insured may receive payouts. Typical options include a period of two years, five years, or up to retirement age.

  • Concurrent Disability: This occurs when there is more than one injury or illness. The benefits are paid as if there is only one injury or illness.

  • Conditional Receipt: For a premium, the insured receives interim coverage during the underwriting process.

  • Elimination Period: Also called the qualifying period, this is the length of time which an employee must be disabled before benefits will begin.

  • Exclusions: Specific conditions for which disability insurance will not cover. Examples are pre-existing medical conditions and disabilities arising from war, riots, felony crimes, or self-infliction.

  • Optional Benefit: Available in the form of riders, these are additional coverages for a basic policy.

  • Own Occupation Disability: Disability determined by whether or not an employee can still perform the duties of his or her own job.

  • Partial/Residual Disability: These are limited benefits offered to those who return to work part time, full time with a loss of earnings, or with limited duties.

  • Presumptive Total Disability: This is defined as a loss of speech, hearing in both ears and not restorable by hearing aids, sight in both eyes after efforts to correct vision, use of both hands, use of both feet, or use of one hand and one foot.

Determining Your Risks

When most people think about the needs for filing a disability claim, an on-the-job accident is usually what first comes to mind. That’s because there are many occupations that lead to a high risk of severe injury, including those in the construction, law enforcement, truck driving, and farming industries.

However, there are other risks to consider. Those who are high users of tobacco and alcohol, are obese, indulge in high-risk behaviors, or have a chronic condition such as diabetes or depression are at the top of the list for experiencing a disability at some point in their lifetime. In fact, approximately 90% of disabilities are caused by illnesses rather than by accidents.

Common causes for long-term disability claims are due to musculoskeletal/connective tissue (28.5%), nervous system and sense organ (14.2%) disorders, and cancer (14.6%).

Try this Personal Disability Quotient (PDQ) calculator to determine your own physical and financial risk percentages.

Deciding On Coverage Options

If you are wondering why you should purchase additional private disability insurance in addition to your Social Security disability insurance policy, consider this. Social Security payouts only total between $700 and $1500 per month, which is probably not even close to covering your family’s living costs, let alone the medical costs that result from being disabled. In 2006, medical problems contributed to 62% of all personal bankruptcies and half of all home foreclosures.

When put that way, the slight cost of proper coverage doesn’t seem so significant. In fact, the average cost for basic private disability insurance is only about 1%-3% of your annual gross income, depending on a variety of factors such as age, occupation, and overall health.

Many insurance carriers offer options, or riders, that can supplement and enhance your basic disability insurance coverage.

If you’re looking to save, there are various ways of doing so, such as by adjusting your benefit period and/or your waiting period or choosing the option to get your money returned at the end of your term if you didn’t file a claim.


Because of the many options and variables, it’s important to seek the advice from an experienced insurance agent. For more information on disability insurance and to get a free quote, contact Insurance Center Associates today.

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