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Disability income insurance can be described as income insurance* or even income protection insurance (where loss of income results from illness or injury). Individual policies are often referred to as disability income insurance. An exception to this is passive income such as rental income or dividends and interest. Because passive income is generally independent of one's services, disability income insurance does not cover it. The principal here is to replace what is lost as a result of illness or injury. Therefore, passive income insurance is not available as a result of disability.
There are many ways you can become disabled and many degrees of disability. Non-cancellable and guaranteed renewable disability income insurance polices are the best way we know to provide what is essentially income insurance (or income protection insurance). Some individuals may feel that they cannot afford income insurance in the form of a disability income policy but if that is truly the case, how could they hope to be able to afford a disability?
Disability insurance for income protection is limited to a percentage of income (excluding passive income), generally around 60% or so. Various types of riders can be purchased because the best disability income insurance products need to serve as income insurance both today and in the future. An example of the best income insurance plans would be a rider that is used in anticipation of future increases in income. What happens if one purchases disability insurance for income protection and his or her income increases significantly over the years? If one were then to apply later in life, one might not be able to get coverage, or it might be much more restricted and/or expensive due to changes in one's health, avocations or lifestyle.
A future increase option (or future insurability option) is a great example of how disability insurance for income protection insurance can really work. This rider can guarantee you that you can buy disability income insurance in the future without medical evidence of insurability. All you need to do is prove that your income has increased enough to justify more coverage (i.e. provide evidence of financial eligibility). Because income tends to increase over time, any good disability income insurance program needs to anticipate this possibility to function as comprehensive income insurance
* Income insurance is more appropriately referred to as income protection insurance or disability income insurance.
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Policy Forms 0100, 1100 and 2100 are underwritten and issued by Berkshire Life Insurance Company of America, Pittsfield, MA, a wholly-owned stock subsidiary of The Guardian Life Insurance Company of America ("Guardian"), New York, NY. Policy Forms NC111 and NC112 in CA are provided by Guardian. Product provisions and features may vary by state. |
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