Call Us (248) 347-3525 ☰ ˟
Logo
Quality independent service and solutions for your insurance needs.
(248) 347-3525

  • Home
  • Get a Quote
    • Auto
    • Homeowners Insurance Quote
    • Disability Insurance
    • Life
    • General Liability
    • Workers Compensation
  • Customer Service
    • Request Declaration and Coverages for Existing Homeowners Insurance Coverage
    • Request ID Card for Auto Policy
    • Notify Us of a Claim
    • Add Driver to Existing Auto Policy
    • Remove Driver from Existing Auto Policy
    • Remove Vehicle from Existing Auto Policy
    • Add Vehicle to Existing Auto Policy
  • Claims
  • Make a Payment
  • Resources
    • Refer a Friend
    • Insurance Glossary
    • Calculators
    • View our Blog
  • About Us
    • About Us
    • Testimonials
    • Partners Page
    • Join Our Newsletter
    • Privacy Policy
    • Location Map
  • Contact Us
Auto Icon Home Icon Business Icon Life Icon Health Icon Boat Icon
Home > Blog > Disability Income 101 - Benefit Period
MONDAY, NOVEMBER 23, 2015

Disability Income 101 - Benefit Period

Trevor Tarpinian, CEPA®
Licensed Insurance Counselor
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

trevor@tfi4insurance.com

Previous Article
Previous Article
Previous Article

Disability Income Insurance 101 - Benefit Periods

The benefit period is the maximum length of time a disability income insurance policy will pay benefits while an insured is on claim. There are typically 2 types of benefit periods. The first sets benefits to a certain age in the future to line up with expected retirement age. For instance, a to-age-65 benefit period would pay $x per month until the insured is age 65 (assuming the insured was permanently disabled). The second type of benefit period sets a flat rate amount of payable years. A 5-year benefit period would pay $x per month for 5 years.

If you receive disability income insurance from an employer-paid, group plan, I generally see the benefit period to age-65. However, I've witnessed some limited benefit periods in corporate plans, particularly in the automotive industry. The one recurring example I see, limits the benefit period to the number of years employed if an employee has worked less than 10 year with the company. So if you worked 4 years with the company, your benefit period is only 4 years. Not a great deal, but still better than nothing. In these cases, clients call me to see how they can supplement the group coverage with their own individual policy.

Basic concepts: As you review your financial and retirement goals, ideally the benefit period should match your retirement horizon. For instance, if you expect to retire at age 70, notwithstanding other factors, a disability income policy should have a benefit period of to-age-70.

Intermediate concepts: The pricing on to-age-65 benefit periods is usually more expensive than a 5-year benefit, which makes sense because on a 35-year old, the potential payout of benefit would be far greater on a to-age-65 benefit period. However if you're nearing age 60 and still need disability coverage, a 5-year benefit may provide the same coverage as a to-age-65 benefit period but with better pricing.

Advanced concepts: In a reduced or modified disability offer, consider negotiating a higher monthly benefit amount to compensate for any lost benefit period. For example, perhaps you've applied for a IDI policy with $2,000 monthly benefit and a to-age-65 benefit period. Due to medical results, the company makes an offer but only with 5-year benefit. If the applicant is 30-years-old, the potential total benefit for the policy would be $840,000 with a to-age-65 benefit period ($2,000 x 12 x 35) but significantly reduced to $120,000 with a 5-year benefit. If you can go back to the company and negotiate a higher monthly benefit (for this example, say $4,000 monthly benefit) and the company accepts that, the potential total benefit would now be $240,000 ($4,000 x 12 x 5). Although that still a quarter of the originally applied-for amount, consider two things here. In the first 5 years of disability, the insured would receive more money sooner than originally applied. Second, take that $240,000 of potential total benefit, and divide by $24,000 ($2,000 monthly benefit x 12 months). Based on the original $2,000 monthly benefit applied for, that essentially gets your insured a 10-year benefit period, up from the 5-year benefit the company offered.

Previous Article
Previous Article
Previous Article
Posted 4:00 AM

Tags: disability income, trevor's blog, disability 101, long term disability insurance
Share |


No Comments


Post a Comment
Required
Required (Not Displayed)
Required


All comments are moderated and stripped of HTML.

NOTICE: This blog and website are made available by the publisher for educational and informational purposes only. It is not be used as a substitute for competent insurance, legal, or tax advice from a licensed professional in your state. By using this blog site you understand that there is no broker client relationship between you and the blog and website publisher.
Blog Archive
  • 2022
  • 2021
  • 2018
  • 2017
  • 2016
  • 2015

  • trevor's blog(18)
  • disability income(9)
  • long term disability insurance(9)
  • disability 101(8)
  • personal insurance(7)
  • life insurance(7)
  • auto insurance(6)
  • mark's blog(6)
  • business insurance(6)
  • workers compensation(4)
  • permanent life insurance(4)
  • homeowners insurance(4)
  • michigan workers compensation 101(3)
  • lawn care insurance(3)
  • home insurance(3)
  • michigan insurance law(3)
  • commercial liability(3)
  • umbrella coverage(2)
  • income protection(2)
  • term life insurance(2)
  • retirement protection(2)
  • family protection(2)
  • utility line coverage(1)
  • assets(1)
  • utility line(1)
  • rv insurance(1)
  • home(1)
  • indexed universal life insurance(1)
  • annuities(1)
  • property(1)
  • home & family(1)
  • budeting & debt management(1)
  • wellness(1)
  • contents coverage(1)
  • tax deferred savings(1)
  • snowmobile insurance(1)
  • savings(1)
  • retirement planning(1)
  • saving tips(1)
  • boat insurance(1)
  • atv insurance(1)
  • retirement(1)
  • fire(1)

View Mobile Version
Facebook
LinkedIn
Get Directions
Message Us
Resources
Products
Customer Service
Payment Options
Report a Claim
About Us
Refer A Friend
Our Carriers
Blog
Contact Us
Contact us 217 S. Center St
Northville, MI 48167

Phone: (248) 347-3525
© Copyright. All rights reserved. Powered by Insurance Website Builder.