Dear Valued Customer,

In this issue of “————————-” we focus on Disability Insurance.

Disability insurance pays an insured individual an income when they are unable to work because of an accident or illness.

If becoming disabled seems unlikely, the odds may surprise you. Roughly three in ten Americans will suffer a disability lasting three months or longer before the age of 65. Nearly one in five Americans will be disabled for one year or more during their working years. And, for many, a sudden interruption in their income could have serious financial consequences.

Read on to understand the different types of disability insurance, how they protect you, the key things to look for when you’re shopping for disability insurance, and more.

We appreciate your continued business and look forward to serving you.

Kind regards,

If you were disabled and unable to work as a result of an accident or illness, what would you and your family do for income?

Disability income insurance, which complements health insurance, can replace lost income. Forty-three percent of all people age 40 will have a long-term (lasting 90 days or more) disability event by age 65.

There are three basic ways to replace income:

1. Employer-paid disability insurance  
   This is required in most states. Most employers provide some short-term sick leave. Many larger employers provide long-term disability coverage as well, typically with benefits of up to 60 percent of salary lasting from five years to age 65, and in some cases extended for life.
2. Social Security disability benefits  
   This can be paid to workers whose disability is expected to last at least 12 months and is so severe that no gainful employment can be performed.
3. Individual disability income insurance policies  
   Other limited replacement income is available for workers under some circumstances from workers compensation (if the injury or illness is job-related), auto insurance (if disability results from an auto accident) and the Department of Veterans Affairs.For most workers, even those with some employer-paid coverage, an individual disability income policy is the best way to ensure adequate income in the event of disability. When you buy a private disability income policy, you can expect to replace from 50% to 70% of income. Insurers won’t replace all your income because they want you to have an incentive to return to work. However, when you pay the premiums yourself, disability benefits are not taxed. (Benefits from employer-paid policies are subject to income tax.)

Source: Insurance Information Institute, “How can I insure against loss of income?” http://www.iii.org website. Accessed November 30, 2015. http://www.iii.org/article/how-can-i-insure-against-loss-income

© Copyright 2016. All rights reserved. This content is strictly for informational purposes and although experts have prepared it, the reader should not substitute this information for professional insurance advice. If you have any questions, please consult your insurance professional before acting on any information presented. Read more.

There are two types of disability policies: Short-Term Disability (STD) and Long-Term Disability (LTD):

1. 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.
2. 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.

Disability policies have two different protection features that are important to understand.

1. Noncancelable 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.
2. 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 the traditional disability policies, there are several options you should consider when purchasing a policy:

• 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.

Source: Insurance Information Institute, “What are the types of disability insurance?” http://www.iii.org website. Accessed November 30, 2015. http://www.iii.org/article/what-are-types-disability-insurance

© Copyright 2016. All rights reserved. This content is strictly for informational purposes and although experts have prepared it, the reader should not substitute this information for professional insurance advice. If you have any questions, please consult your insurance professional before acting on any information presented. Read more.

Talk to the agent who sells you your life, health, auto or business insurance—he or she may either sell disability coverage or will be able to refer you to an agent who does.

Your state’s insurance department will also have names of agents and companies writing policies in your state.

Make sure that you understand what you are buying and don’t be afraid to ask your agent to explain exactly what is in the policy.

Key things to look for when you shop around

1. The definition of disability
   Some policies pay benefits if you are unable to perform the customary duties of your own occupation. Others pay only if you are unable to perform any job suitable for your education and experience. Some policies define disability in terms of your own occupation for an initial period of two or three years and then continue to pay benefits only if you are unable to perform any occupation. “Own occupation” policies are more desirable, but more expensive.
2. Benefit period
   The benefit period is the amount of time you will receive monthly benefits during your life. Experts usually recommend that the policy you buy pay you benefits until at least age 65, at which point Social Security disability will take over. If you are young, you may consider buying a policy offering lifetime benefits because it will still be relatively inexpensive.
3. A policy that will replace from 60 percent to 70 percent of your total taxable earnings
   A higher replacement percentage, if available, is more expensive. Evaluate your other sources of income before deciding how much disability coverage you need.
4. Coverage for disability resulting from either accidental injury or illness
   An accident-only policy is less expensive but does not provide adequate protection. Ideally, both accident and illness coverage should be purchased.
5. A cost-of-living increase in benefits
   You are buying a policy today that may not pay benefits for a decade or more. Should you need those benefits, you will want them to have kept pace with increases in the cost of living. (Some companies also offer “indexed” benefits, keeping pace with inflation after benefit payments begin.)
6. A policy paying “residual” or partial benefits
   This type of policy is available so that you can work part-time and still receive a benefit making up for lost income. A standard feature in some policies, and added by a rider to others, a residual benefits policy pays partial benefits based on loss of income without an initial period of total disability.
7. Transition benefits
   Offered by some companies, it can offset financial loss during a post-disability period of rebuilding a business or professional practice.
8. Ongoing coverage
   A non-cancelable policy which will continue in force as long as the premiums are paid; neither the benefit nor the premium can change. A guaranteed renewable policy keeps the same benefits but may cost more over time since the insurer can increase the premium if it is increased for an entire class of policyholders.
9. Financial stability
   Check the financial ratings of an insurer. Your insurance agent or company representative should provide this information or check with the following companies, which rate insurance company strength:

• A.M. Best Company, Inc.
  Ambest Rd.
  Oldwick, NJ 08858
  908-439-2200
  http://www.ambest.com
• Fitch Ratings
  1 State Street Plaza
  New York, NY 10004
  1-800-75-FITCH
  http://www.fitchibca.com
• Moody’s Investor Services
  99 Church Street
  New York, NY 10007
  212-553-0300
  http://www.moodys.com
• Standard & Poor’s Insurance Ratings Services
  55 Water Street
  New York, NY 10004
  212-438-2000
  http://www.standardandpoor.com
• Weiss Research
  15430 Endeavor Drive
  Jupiter, FL 33478
  800-289-9222
  http://www.weissratings.com
• Waiting period
  Every disability policy imposes a waiting period, also known as the elimination period. This is the number of days you must be disabled before receiving benefits. If you are disabled during the elimination period, you will not receive any benefits, even though you are not able to work. If the elimination period is short, such as 30 or 60 days, the premium will be higher. A longer elimination period may strain your finances more when you need it, but you will be charged a lower premium. Most experts recommend that you select an elimination period of 60 to 90 days. The first check is usually paid 30 days after the waiting period.

Source: Insurance Information Institute, “How can I purchase disability insurance?” http://www.iii.org website. Accessed November 30, 2015. http://www.iii.org/article/how-can-i-purchase-disability-insurance

© Copyright 2016. All rights reserved. This content is strictly for informational purposes and although experts have prepared it, the reader should not substitute this information for professional insurance advice. If you have any questions, please consult your insurance professional before acting on any information presented. Read more.