Disability Insurance
In general there are two types of disability policies, Short-Term Disability (STD) and Long-Term Disability (LTD). The difference between STD and LTD is as follows:
- Short-Term Disability policies (STD) have a waiting period of 0 to 14 days with a maximum benefit period of no longer than two years.
- Long-Term Disability policies (LTD) have a waiting period of several weeks to several months with a maximum benefit period ranging from a few years to the rest of your life.
It is important to know that Disability policies have two every distinctive protection features which are extremely important to the consumer when buying a Disability policy. They are termed Non-cancellable and Guaranteed Renewable, which mean:
- Non-cancelable means the policy cannot be canceled by the insurance company, except for nonpayment of premiums. This gives you the right to renew the policy every year without an increase in the premium or a reduction in benefits.
- Guaranteed renewable gives you the right to renew the policy with the same benefits and not have the policy canceled by the company. However, your insurer has the right to increase your premiums as long as it does so for all other policyholders in the same rating class as you.
In addition to purchasing a traditional disability policies, there are several other available options to consider which include:
- Additional purchase options - Your insurance company gives you the right to buy additional insurance at a later time.
- Coordination of benefits - The amount of benefits you receive from your insurance company is dependent on other benefits you receive because of your disability. Your policy specifies a target amount you will receive from all the policies combined, so this policy will make up the difference not paid by other policies.
- Cost of living adjustment (COLA) - The COLA increases your disability benefits over time based on the increased cost of living measured by the Consumer Price Index. You will pay a higher premium if you select the COLA.
- Residual or partial disability rider - This provision allows you to return to work part-time, collect part of your salary and receive a partial disability payment if you are still partially disabled.
- Return of premium - This provision requires the insurance company to refund part of your premium if no claims are made for a specific period of time declared in the policy.
- Waiver of premium provision - This clause means that you do not have to pay premiums on the policy after you're disabled for 90 days.
Special Note: This summary outlines in general terms the coverages afforded under some policies. Examine the policy carefully for any exclusions, limitations, or any other terms or conditions that may specifically affect coverage. The terms and conditions of the policy prevail.