The following appeared in the local news paper on disability insurance.
WHEN YOUR INCOME IS DISABLED
DISABILITY INSURANCE CAN SAVE YOUR SALARY
By KATHY de YAMPERT
Gannett News Service - August 28, 1995
Many consumers are careful to insure their car and their home, but relatively
few pay much attention to insuring their income. "Probably the No. 1 thing we
hear from people who recently have been disabled is 'thought this could never
happen to me,'" said Dayle Olson, president of Brevard Achievement, a
nonprofit agency in Brevard County, Fla., that helps disabled people get
training and find jobs. "It can happen to anyone. It doesn't matter how
health-conscious or careful you think you are, you can become disabled."
There's one chance in 21 that you'll be in a disabling accident, based on
National Safety Council statistics. By comparison, there's only one chance in
96 that you'll have a fire in your home.
Long-term disability -- whether caused by illness or injury -- is about four
times more likely than death at age 30, about three times more likely at age
40 and about twice as likely at age 50.
For adequate protection, don't rely on the safety net of Social Security and
Workers' Compensation benefits alone, financial planners say.
Take advantage of any disability insurance coverage provided by your
employer. Only about half of mid-size to large employers provide long-term
disability benefits for at least five years, estimates the Health Insurance
Association of America. Most of those employers provide benefits that
replace about 60 percent of income, and payments are taxed.
Private disability insurance is available for those who don't have access to
disability insurance through an employer, or to enhance an employer's
disability benefits.
If you need private coverage, shop around to compare rates, provisions and
limitations.
For example, some policies cover you only if you are unable to do any kind of
job, no matter how low the pay. Better: a policy that pays you if you can't
perform in the occupation you were trained or in a closely related
occupation.
And you may prefer a "noncancelable" policy -- the insurance company can't
raise the premium or change the benefits. A "guaranteed renewable" policy
will be renewed with the same benefits, but the insurance company may raise
the premiums. "Optionally renewable" or "conditionally renewable" policies
may be renewed annually at the insurance company's discretion.
You can trim the cost of your policy by lengthening the time of the waiting
period before benefits kick in. Waiting periods vary from 30 days to six
months.
KEY FACTORS IN DETERMINING RATES
Private disability premiums can vary widely depending on your individual
circumstances as well as policy limitations. Major factors that affect costs:
AGE: The younger you are when you take out a disability policy, the less
your premium. This is important in today's corporate climate of layoffs; if
you lose your job, you usually lose your company disability coverage.
Jules Gronich of Professional Benefits Group Inc., an independent insurance
agency in Melbourne, Fla., says a male nonsmoker who wants monthly benefits
of $3,000 up to age 65 after a 90-day waiting period would pay about $877 a
year for a policy starting at age 25, $1,153 at age 45, and $2,740 a year at
age 55.
OCCUPATION: Depending on the statistical probability of injury in your job,
you'll pay more or less for your policy.
A nonsmoking, 35-year-old financial consultant, sales manager or other
professional would pay $36 a month for a Nationwide Insurance policy that
pays $1,020 a month up to age 65 after a 90-day waiting period, but a light
manual or skilled laborer (a barber or electrician) would pay about $58 a
month, said Sandy Faires, an associate agent with Marion David Ranzino
Agency.
SEX: Men get better rates than women because they tend statistically to have
fewer health problems. In the above example calculated by Faires, the
professional woman would pay about $45 a month and the female manual or
skilled laborer would pay about $80 a month.
HEALTH: Nonsmokers and relatively healthy people get better rates.
COMPARE POLICY PROVISION
When shopping for disability insurance, you'll want to weigh costs and
protection provided. Coverage that is too limited may not be worth the
price. The Health Insurance Association of America suggests you ask the
following questions about any disability insurance policy you're considering:
- How is "disability" defined? Inability to perform your own job? Inability
to perform any job?
- Does the policy cover accidents? Illness?
- Are benefits available for total disability? For partial disability? Only
after total disability?
- Are full benefits paid whether or not you are able to work for loss of
sight? Speech? Hearing? Use of limbs?
- What percentage of income will the maximum benefit replace?
- Is the policy noncancelable, guaranteed renewable or conditionally
renewable?
- How long must I be disabled before premiums are waived?
- Is there an option to buy additional coverage, without evidence of
insurability, at a later date?
- Does the policy offer an inflation-adjustment feature? If so, what is the
rate of inflation? Is there a maximum?
HOLES IN THE SAFETY NETS
By KATHY de YAMPERT
Gannett News Service
Social Security disability and workers' compensation programs can serve as
safety nets for wage earners in case of disability. Unfortunately, those
nets have holes in them through which disabled workers might fall. That's
because government guidelines for eligibility are stringent, and not all
people who consider themselves disabled fall within those guidelines. In
addition, there are limits on payments.
"One of the biggest points of contention is the definition of disability,"
said Tom Margenau, deputy press officer for the Social Security
Administration. "What one person may consider a disability, another person
may consider a minor inconvenience."
When a disability is considered clear-cut under federal guidelines,
applicants might receive disability payments in three months or less. When a
disability is borderline under the guidelines, the appeals process can take
two years.
The administration is working to reduce the time needed for the process.
"We're in the middle of a massive restructuring that's going to take years to
complete," Margenau said. Depending on the disabled person's former salary
level and the number of years worked, monthly payments from the Social
Security disability program can be as much as $1,400 a month. If the person
doesn't have enough work credits for that program, Supplemental Security
Income of up to $450 a month kicks in.
Workers who are injured on the job may be eligible for workers' compensation
benefits. Benefits are available through employers who participate in the
program. Workers' comp benefits are limited depending on when you're
injured, how seriously you're injured and what other benefits -- such as
private disability insurance or Social Security payments -- you are
receiving.
DISABLING INJURIES CAN JEOPARDIZE INCOME
Disability probabilities and how long will it last (probability expressed as
a percent)
(A) Probability of disability over 90 days
(B) Expected duration of disability in years if you were out for at least 90
days
Given one year of disability, what is the probability of:
(C) disability lasting more than two years
(D) disability lasting more than five years
Age (A) (B) (C) (D)
25 20.3% 2.4 years 39.0% 26.0%
30 19.6% 2.9 years * *
35 18.9% 3.4 years 46.0% 34.0%
40 18.1% 3.9 years 53.0% 41.0%
45 17.0% 4.2 years 61.0% 49.0%
50 15.3% 4.5 years 63.0% 55.0%
55 12.5% 4.6 years 72.0% 61.0%
* Values not supplied
----- E N D -----
Regards,
Alan
