NH money advice: Understanding group disability insurance

Advice offered by Marc Hebert, president of The Harbor Group Inc., a certified financial planner. If you have any questions about finance or if you’d like to suggest a future topic, email [email protected] people think of their most valuable asset, they usually think of their home or investment portfolio. But for most, it really is the ability to earn a living. Consider what your financial life would be like if you weren’t able to work for an extended length of time. Disability insurance may help provide you the income you need in the event you are injured or unable to work. Disability insurance is sometimes offered through groups that have a common interest, such as an employer or trade group. Group disability insurance can be an affordable source of this important coverage. With group disability insurance coverage, you are not issued an individual policy nor are you evaluated for coverage as an individual. Instead, the policy is issued to the company or organization that represents the group. The individuals within the group that apply for disability insurance are issued certificates of coverage rather than individual policies. There are two types of group disability coverage: short-term and long-term. Short-term coverage plans generally pay benefits for a few months, although sometimes it can be as long as two years. These policies are often designed to be effective until long-term coverage kicks in. Long-term disability coverage may pay benefits for several years or until a certain age, such as 65. The long-term benefits are usually coordinated with the benefits from the short-term plan so the disability coverage is continuous. When reviewing group disability insurance, here are some things to keep in mind:Group disability often has flexible underwriting. During the initial or open enrollment periods, you may not have to pass a physical to join the plan. This is because the risk of disability is borne by the group rather than by an individual. The plans may have a certain base benefit but allow the participant to add on other benefits at a cost. When you leave your job or terminate your relationship with the group, you usually can’t take your group disability coverage with you. These policies generally can’t be converted into individual policies. The benefit may be reduced by payments you receive from workers’ compensation, Social Security, or other government benefits. The premium may be paid by you, your employer, or both. Depending on who pays the premium, the benefit may be taxable or not. Usually, if the premium is paid on a pre-tax basis, the benefit will be taxable to you. This is an area you will need to discuss with your advisor. When reviewing your particular plan, consider the following:How long do the benefits last once you become disabled? Are there additional limits that depend on the type of disability? For example, is there a different time limit if the disability is due to an addiction? How long is the elimination period? This is the time frame you will have to wait before receiving disability benefits. How much of your income does the policy replace? Policies typically pay a benefit equal to 50% to 66% of your gross monthly base salary. The benefit may also be capped at a monthly amount. What is the definition of disability? Generally, you must be under the care of a doctor due to an illness or injury that impairs your ability to work in either “your own occupation” or in “any occupation.” Disability could also be defined as any occupation for which you might be qualified based on your education, experience, or training. Or, your policy’s definition might be a combination consisting of your “own occupation” for a certain period and “any occupation” for timeframes thereafter. It is important to look at other aspects of your financial life to determine if the disability income benefits will be enough to get you through the tough times. Areas to consider are the expenses you could reduce if disabled, your cash reserves, and your other sources of income.

Advice offered by Marc Hebert, president of The Harbor Group Inc., a certified financial planner. If you have any questions about finance or if you’d like to suggest a future topic, email [email protected]

When people think of their most valuable asset, they usually think of their home or investment portfolio. But for most, it really is the ability to earn a living. Consider what your financial life would be like if you weren’t able to work for an extended length of time.

Disability insurance may help provide you the income you need in the event you are injured or unable to work. Disability insurance is sometimes offered through groups that have a common interest, such as an employer or trade group. Group disability insurance can be an affordable source of this important coverage.

With group disability insurance coverage, you are not issued an individual policy nor are you evaluated for coverage as an individual. Instead, the policy is issued to the company or organization that represents the group. The individuals within the group that apply for disability insurance are issued certificates of coverage rather than individual policies.

There are two types of group disability coverage: short-term and long-term.

Short-term coverage plans generally pay benefits for a few months, although sometimes it can be as long as two years. These policies are often designed to be effective until long-term coverage kicks in.

Long-term disability coverage may pay benefits for several years or until a certain age, such as 65. The long-term benefits are usually coordinated with the benefits from the short-term plan so the disability coverage is continuous.

When reviewing group disability insurance, here are some things to keep in mind:

Group disability often has flexible underwriting. During the initial or open enrollment periods, you may not have to pass a physical to join the plan. This is because the risk of disability is borne by the group rather than by an individual.

The plans may have a certain base benefit but allow the participant to add on other benefits at a cost.

When you leave your job or terminate your relationship with the group, you usually can’t take your group disability coverage with you. These policies generally can’t be converted into individual policies.

The benefit may be reduced by payments you receive from workers’ compensation, Social Security, or other government benefits.

The premium may be paid by you, your employer, or both. Depending on who pays the premium, the benefit may be taxable or not. Usually, if the premium is paid on a pre-tax basis, the benefit will be taxable to you. This is an area you will need to discuss with your advisor.

When reviewing your particular plan, consider the following:

How long do the benefits last once you become disabled? Are there additional limits that depend on the type of disability? For example, is there a different time limit if the disability is due to an addiction?

How long is the elimination period? This is the time frame you will have to wait before receiving disability benefits.

How much of your income does the policy replace? Policies typically pay a benefit equal to 50% to 66% of your gross monthly base salary. The benefit may also be capped at a monthly amount.

What is the definition of disability? Generally, you must be under the care of a doctor due to an illness or injury that impairs your ability to work in either “your own occupation” or in “any occupation.” Disability could also be defined as any occupation for which you might be qualified based on your education, experience, or training. Or, your policy’s definition might be a combination consisting of your “own occupation” for a certain period and “any occupation” for timeframes thereafter.

It is important to look at other aspects of your financial life to determine if the disability income benefits will be enough to get you through the tough times. Areas to consider are the expenses you could reduce if disabled, your cash reserves, and your other sources of income.

https://www.wmur.com/article/new-hampshire-money-group-disability-insurance/40115195

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