Note

Information in this presentation is derived from Insurance for Dummies by Jack Hungelmann.

I highly recommend this book.

Before age 65, you are three times more likely to become disabled for six months or more than die

Odds of suffering a disability that lasts 90 days or more before the age of 65: 1 in 8Source: www.ricedelman.com

Someone age 45, has a 1 in 4 chance of suffering a long-term disability before age 65Source: www.ricedelman.com

Age Death Long Term Disability

25 24.1% 34.8%

30 23.5% 33.1%

35 22.8% 31.3%

40 21.8% 29.1%

45 20.4% 26.3%

50 18.3% 22.6%

55 14.9% 17.6%

60 9.3% 10.6%

Review the prior statistics

Severe Example from www.ricedelman.com Say, a 35 year old is disabled and collects

$2,000 per month for 30 years.

The Insurance company would pay out $720,000 over time

What percentage of income is paid? usually 60-80 percent

What is the benefit period/length of coverage? e.g., to 65, five years

What is the definition of disability? “any occupation” vs. “own occupation”

Total Disability vs. Residual Disability?(discussed later)

What is the elimination or waiting period? (discussed later)

Is the policy “noncancelable”? Is the policy “guaranteed renewable”? (discussed later)

What steps are required to prove you are unable to work?

Is there a “cost-of-living” rider? Is there a future purchase option?

Living Expenses

PLUS

Add 10-20% because expenses may increase when you have a disability

________________________________________Note 1: Insurance companies often limit

coverage to 80-90% of take-home pay.Note 2: Social security disability is difficult

to qualify for, so ignore it in your planning.

Typically 2, 5, to age 65, or rest of your life

Considerations Many disabled people recover within 5

years Risk if you are one of the unlucky

individuals who have a lifetime disability Your other resources

Total Disability: policy only covers you if you cannot work at all– so, if you can work a few hours a week, your disability insurance would not “kick in”.

Residual Disability (recommended): receive proportional coverage if you are unable to work full-time

Typical choices: 30, 60, 90, or 180 days

Considerations Employer package regarding sick days

and so forth Your safety net– how much savings do

you have?

Noncancelable: cannot raise the premium to age 65

Guaranteed Renewable: can raise the premium, but cannot single you out based on your personal situation

Provides the opportunity to purchase additional insurance in the future regardless of your health– no physical exam or application required

Usually no cost of living increase

Many cover only total disabilities, not partial or residual benefits

Group benefits are taxable