Secure Financial Solutions

Should I have Illinois disability insurance?

If you become sick or hurt and are unable to work, how long could you survive without an income? Do you have enough savings? Are your investments liquid? Can you borrow equity from your home?

You may think that you have enough, but for many, disability insurance may be the difference between a financial struggle and peace of mind.

Disability insurance protects your ability to earn an income.

Anyone who relies on their ability to work to earn a living should purchase disability insurance!

What is Illinois disability insurance?

Disability insurance is sometimes referred to as income protection. It will protect your ability to continue to earn a living. If you become disabled by sickness or an accident, you will receive payments (based on your particular policy) from your insurance company, which will help you continue paying your living expenses such as rent, mortgage, car payments, food, insurance, utilities, medical expenses, and more. It can also pay for additional medical costs associated with your disability that medical insurance won't cover.


What are the types of disability insurance that are available in Illinois?

INDIVIDUAL DISABILITY INSURANCE - Individual policies specify how much you will be paid, how soon after you are disabled benefits will begin, and when benefits will end. Policies generally provide replacement of 50 to 70 percent of income. The length of time for which you may receive benefits can depend on whether accident or illness caused the disability. Benefits begin following a waiting period, which is the period between the time you become disabled and the time your benefit payments begin. An individual policy will move with you throughout your career.

If you purchase an individual disability income insurance policy for yourself, and pay premiums with after-tax dollars, the benefits you receive are generally tax free.

GROUP DISABILITY - Group policies are available from some employers. This is a great benefit for employees, but generally does not convert, or converts to a smaller percentage of coverage when you change jobs.

Benefits received under these plans may be limited and may be taxable to you if the employer is paying the premium.

An excellent idea is to purchase an individual plan that can supplement a group plan.

Check with your employer to see if your company offers group benefits and if so, the specific coverage of the group plans.

SOCIAL SECURITY DISABILITY (SSDI) - Social Security benefits are available if you have worked in jobs covered by Social Security and meet the Social Security definition of disability. Benefits are based on several factors such as the age you became disabled, the amount of work credits you have and your earnings.

It can be very difficult to qualify for Social Security benefits. Even if you do qualify, the amount you receive may not be enough to cover your living expenses!

To find out more about Social Security benefits go to the federal government website at www.ssa.gov

WORKERS COMPENSATION - Worker's compensation is another form of disability benefit. Most employers are required to provide coverage.

Worker's compensation only pays if you are hurt on the job!

What are the options to choose from in an individual Illinois disability insurance policy?

Policy benefits can vary greatly, so it's important to understand what your options are. Read your policy carefully and ask your agent questions so that you can make an informed decision. Benefits vary according to each insurance company, so make certain you have the correct information about your policy. Most policies include a waiver of premium benefit, which allows you to not pay premiums while you are receiving benefits.

Benefit Amount - This is the portion of your salary covered by your particular policy. Most policies cover between 50% to 70% of your salary, with some restrictions in place for salaries over $100,000.

Benefit Period - This is the length of time you will receive payments from your insurance company and will vary based on your policy. Your choices are usually anywhere from as short as 6 months and as long as a period that would pay benefits all the way to age 65!

Elimination Period - Commonly referred to as the waiting period, is the amount of time between the beginning of the disability and the date you qualify to begin receiving benefits.

The choices are usually anywhere between 30 days all the way up to 1 year. Under some conditions, longer elimination periods may be available.

Guaranteed Renewability - You have the right to renew the policy with the same benefits, but the insurer can increase your premiums - as long as they are increased for all other policyholders in the same class (i.e., having the same characteristics).

Listed below are additional riders that should be considered for an Illinois individual disability policy:

Own Occupation Rider - Own occupation, or "own occ", is a feature built into the definition of total disability. You may still be able to receive benefits if disabled, even if you can perform a different occupation than your own!

The ability to perform specific activities related to your occupation is an important consideration. Ask what the definition of total disability is for the policy you are considering.

Noncancelable Option - This option gives the policy holder the guaranteed right to renew the policy each year, usually until age 65.

During the noncancelable period, the insurer cannot cancel the policy, change the policy benefits, or increase the premiums!

Future Purchase or Guaranteed Insurability Option - This rider allows you to purchase additional disability income insurance as your income increases, without providing proof of medical insurability.

Even if you develop a condition that would normally prevent you from obtaining additional coverage after you purchase your original policy, you could still increase your benefits!

Cost of Living Adjustment - COLA provides for an annual increase in benefits (generally after you have been disabled for a year), usually based on a Consumer Price Index or a predetermined percentage. This helps your benefits keep pace with inflation, and is particularly important if you are disabled for a long time.

Residual Benefit - This pays you a portion of your monthly disability benefit if you have a drop in income due to a disability (e.g., if you are working part time). In most cases you need to satisfy a minimum percentage loss in earnings (e.g., a 20 percent loss) to qualify.

Social Security Rider - If you are disabled, these riders pay you additional benefits if you are not able to receive Social Security disability benefits because of the Social Security Administration's definition of disability.

Usually, an individual disability policy with this rider will pay after the waiting period for the policy and during the five-month period (sometimes up to a year) while you are waiting for Social Security to kick in. If Social Security denies your claim, this rider will continue to pay benefits for the duration of the benefit period.

Surrender Value Rider (or return of premium) - This option returns all premiums paid, minus any benefits paid over the life of the policy at age 65.

While this benefit can cost more, it will assure that you will receive all of your money back at a later date if the policy is never used!

Activities of Daily Living Rider - This benefit pays an additional benefit for catastrophic disabilities. This rider along with the base policy benefits, you may have the ability to replace up to 100% of your income.

Tips on buying Illilnois individual disability insurance.

Look for policies that contain or have the available option for "own occupation" definition of disability. If the policy states "any occupation", you may not be able to collect benefits if you can work in another occupation while disabled.

Make certain that the policy covers you for all forms of disability due to illness or accident while you are on or off the job (24 hour coverage).

Avoid "accident only" or "non-occupational" coverage. These policies may look inexpensive, but have very limited benefits that may not be of use to you.

Hazardous occupations and persons with health conditions will cost more to insure, so consider making the waiting periods longer or shortening the benefit period to make premiums more reasonable.

Non cancelable policies can cost more initially, but assure you of no future rate increases.

Consider a cost of living adjustment rider to keep current with inflation, especially if you buy your policy at a younger age.

If you are self-employed, a business overhead disability policy can cover not only your income, but will pay for additional business expenses, such as payroll, rent, utilities, etc.

Some policies will offer additional benefits, such as a benefit to modify your home to cope with your disabled condition, retroactive benefits for injury during a waiting period, and even job retraining and education!