Over the past five years I have discussed disability insurance with hundreds of individuals and businesses. I believe that there is a problem with how these types of benefit programs are being presented. I know that cost matters, but I firmly believe consumers should be making an informed decision. The spreadsheet is an example of what many consumers are presented with to make their decision. It answers a few questions, but mainly shows what the cost will be. How will the consumer know which program will perform best if the only difference is cost?
THE DEFINITION OF DISABILITY IS THE HINGE FOR THE ENTIRE DISABILITY CONTRACT. NOTHING ELSE MATTERS UNTIL THE DEFINITION OF DISABILITY IS SATISFIED.
WHAT IS THE DEFINITION OF DISABILITY
The definition of disability defines how the beneficiary will qualify for benefits and has two main components.
- Occupation Test – the inability to perform a job either fully or partially
- Earnings Test –the inability to earn income either fully or partially
AND VERSUS OR
All disability contracts require the beneficiary to meet one or both of the tests, described above, to qualify for benefits. This is not disclosed on a price comparison spreadsheet. There is one major caveat to the definition that differs between carriers and that is whether the word and versus or is used within the definition.
Common language within a contract will state that the beneficiary must be unable to perform the material and substantial duties of their own occupation “and” have a 20% or more loss of earnings.
The word AND has a very powerful meaning when used in this definition because it’s telling the beneficiary that they must meet both the occupation test AND the earnings test in order to receive benefits.
Some carriers will replace the word AND with the word OR in their definition of disability. When OR is substituted the beneficiary has to meet either the occupation test OR the earnings test in order to qualify for benefits.
A disability contract is not quite that simple, there are additional questions and details that should be considered, but if you have determined your definition of disability, you are on your way to making an informed decision on the program that is right for you.
Here are some additional points to consider when making a decision.
- When will the benefits start?
- When will benefits end?
- How much will the benefit be?
- Are my benefits taxable?
- What do I have to do to qualify?
- What if I have multiple disability policies?
If you have a program in place, do you know what your definition of disability is or if you are interested in establishing a disability benefit program contact Tom Snow | 906.315.7236 |email@example.com. Be an informed consumer!