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Some things to consider when determining disability income needs are:
- Establish the bare minimum required if income stops.
- Determine your retirement needs if work ceases and the ability to pay into the retirement ends.
- Allow for any benefit that might be offset by social security and workers compensation.
Some thought needs to be afforded to the possibility of “total disability.” That definition is important as it is always defined in a policy and different companies may use different definitions.
Interpretation is important as it pertains to the insured’s own occupation and any occupation the insured may be qualified to perform.
Occupation Insurance Agent Novelty 9"x12" Metal Aluminum Parking Sign
The first method used to determine total disability concerns the occupation that the insured is normally engaged in. In this case total disability might be defined as “the insured’s inability to perform any or
all of the duties or his or her own occupation.” This is determined by the insured’s occupation at the time that disability begins.
The second method is more restrictive defined as “the insured’s inability to perform the duties of any occupation for which he or she is reasonably qualified by education, training or experience.”
In other words, while you may no longer be able to conduct the duties of your current occupation you may be able to perform activities in a related field.
Forecasting the Labour Market by Occupation and Education: The Forecasting Activities of Three European Labour Market Research Institutes
There are some disability income policies that use another criterion to classify total disability. This is called presumptive disability and automatically qualifies the insured for total disability classification.
These conditions are:
- Loss of use of any two limbs
- Total and permanent blindness
- Loss of speech and hearing
Presumptive disability may also be decided by using a loss of income test. If the earnings after disability significantly drop below pre-disability earnings by a given percentage the insured may be considered totally disabled.
Usually short-term policies cover non-occupational disability but most long-term policies cover both occupational and non-occupational sickness and accidents. Bear in mind, however, that occupational
benefits are usually reduced by benefits received form workers compensation and social security.
Other considerations are the probationary period, elimination period and the benefit period.
