Peter C. Ciravolo
DISABILITY INCOME INSURANCE FREQUENTLY ASKED QUESTIONS (FAQs) / 101 - BC Brokerage
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WHAT IS THE DIFFERENCE BETWEEN SHORT TERM DISABILITY (STD) AND LONG-TERM DISABILITY (LTD)?
The main difference STD and LTD is how long the coverage is. Short-term disability insurance lasts for a shorter period of time, usually starting at a few months and no longer than a year. Your long-term disability insurance will not begin until any short-term disability benefits have been exhausted, and can last until your retirement.
WHO NEEDS DISABILITY INCOME INSURANCE?
Anyone who relies on their income to maintain their lifestyle. This is the majority of Americans.
Unfortunately, many people think because they have LTD through work that they are fully insured, when really the average LTD policy through an employer offers only 60% of their gross income. This is where BC Brokerage helps their clients understand this risk in their financial plan, and find multiple solutions to fix it.
DO I NEED ANY RIDERS?
We specialize in working with own occupation disability income policies. This allows the contracts to have a very strong starting policy definition, and thus, policy benefits.
We help each of our clients understand the optional riders offered on each policy. The most commons riders we put on policies include a Cost of Living Adjustment (COLA) and Future Increase Option (FIO).
WHAT VARIABLES GO INTO PRICING A DISABILITY INCOME POLICY?
There are many factors, but here are the main ones:
Benefit period / amount
WHAT IS AN ELIMINATION PERIOD?
An elimination period is the amount of days you need to be disabled before a benefit is to start. For most STD plans, this is 14 days, for most LTD plans, this is 90 days.
The elimination period is often referred to as "a time deductible." The longer the elimination period, the less likely you are to qualify a claim, and thus, lower premiums.
ARE DISABILITY INCOME BENEFITS TAX FREE?
Yes. This is because you are using post tax dollars to fund your policy.
Policies offered through employers usually cover 60% of your gross income, so after taxes this nets to around 45% on average.