Disability Definition Is Key in Determining Eligibility for Benefits
It pays to be an educated consumer, especially when it comes to understanding your disability income insurance. The best way to learn about your coverage is to read your policy's fine print. Here you'll find such details as benefit amounts, any exclusions that apply and the criteria necessary to be considered disabled by your insurance company. Arguably, this definition of disability is the most important aspect of your policy because it will govern whether you qualify for disability benefits at the time of need.
The most basic definition of "disability" is the inability to earn income due to sickness or injury. However, different insurers break down that broad definition into more specific circumstances:
* Own Occupation - Defines disability as the inability to handle the fundamental duties of your own occupation. This means you can be considered disabled and receive benefits while working at another occupation. Rates are highest for this type of policy and generally this coverage only makes sense for individuals employed in highly skilled occupations such as surgeons, dentists, trial lawyers, etc.
* Modified Own-Occupation - The most common definition found in policies written today. Pays benefits if you are unable to perform the substantial and material duties of your occupation and are not working in another occupation.
* Any Occupation - A policy of this type defines disability as the inability to perform the duties of any occupation. Qualifying for benefits means you must be completely unable to handle working at any job.
* Combination (Short-Term Own Occupation Coverage) - If you purchase this type of policy, you will receive own occupation coverage for a set period of time, generally two years. When that time period lapses, you must show that you are unable to perform the duties of any occupation to continue receiving benefits.
* Presumptive Total Disability - There are certain catastrophic conditions that automatically render you totally disabled in the eyes of most insurance companies, regardless of whether they were caused by injury or illness. They include the loss of sight in both eyes, hearing in both ears, speech, the use of both hands, the use of both feet, or the use of one hand and one foot. Becoming disabled by one of these conditions not only entitles you to receive immediate benefits, but it also allows you to receive benefits even if you are able to resume working.
* Residual Disability (Income Replacement Coverage) - This type of coverage pays benefits if you are able to work part-time, but your income has decreased as a result of your disability. The benefit amount is calculated by determining the percentage of your current part-time income in relation to your former full-time income. Some insurance companies require a period of total disability before you are eligible to receive residual benefits.
* Partial Disability - This coverage also pays benefits if you can perform some, but not all of the duties of your occupation.
In addition to understanding your insurer's definition of disability, you should also know whether your policy provides a reduced benefit if you receive benefits from workers' compensation, Social Security, or other government programs.
Disability income insurance can be instrumental in helping a disabled person and his or her family maintain some quality of life economically if they are unable to work. But policies are all legal contracts that need to be understood prior to the time of need.
