Newspapers / Q-notes (Charlotte, N.C.) / May 26, 2001, edition 1 / Page 13
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Lynn Davidson money matters Understanding Disability Income Insurance byj. Lynn Davidson, CFP Special to Q-Notes The ability to earn a living is an asset many people take for granted. If you are young and in good health, it’s unlikely you’ve given much thought to what would happen if you be came disabled. Neverthe less, the best available ac tuarial information sug gests that, at age 35, dis ability posess a greater risk foryou than death. While the estimates vary, it’s clear that a significant number of Americans face the risk of temporary or permanent total or par tial disability at some point in their livgs. Moreover, the risks associated with becoming disabled can have some unique implications for lesbians and gay men. Understanding the need for adequate disability in surance is an important part of any financial plart. Understanding the special needs that arise from the risk of disability is especially important for mem bers of the gay community. What are the special needs some gay men and lesbians may need to consider as part of their dis ability planning? Generally speaking, when an in dividual becomes disabled, a support network emerges to help this person adjust to his or her new circumstances, often providing assistance that lasts for the duration of the disability. Almost always, this support network includes family members — parents, siblings, and/or chil dren. It is unfortunate but true that many mem bers of the gay community remain estranged from their biological families — either because of their orientation or because they have been unable to disclose their orientation. Consequently, the criti cal support network for organizing one’s life after a disabling event may not exist for some members of the community. Instead of relying on family, common tasks such as housekeeping, running errands, and so on may require paid assistance. Because of the unique fam ily circumstances in which some lesbians and gay men find themselves, disability actually may be more expensive than average for some members of the community. Now that you’ve established the need, it’s time to focus on ways to insure against it. Choosing the right disability policy can be a daunting task, and it’s likely you’ll want the help of a financial advisor. There are certain basic concepts you’ll want to be familiar with before evaluating your options: Amount of Coverage. Your policy should replace between 60 and 70 percent of your pre-disability income (for some higher incomes, usually $80,000 or more, replacement can be at 30 to 40 percent). Definition of Disability. Make sure your policy does not exclude coverage for “occupational” dis abilities, which arise if you receive worker’s com pensation benefits. “Worker’s comp” is not an ad equate substitute for private disability insurance. Definition of Occupation. Some policies pro vide coverage as soon as a disability prevents you from continuing to work in your own occupation; others require you to be unfit for work in any occu pation before benefits begin. You may consider the latter unacceptable. If you can’t find permanent “own occupation” coverage (which is increasingly diffi cult to obtain) your policy should provide “own oc cupation” benefits for a minimum initial period be fore it switches to an “any occupation” definition. Renewability. In theory, there are six different types of renewability provisions that may be offered for any given policy. In order to avoid the risk your insurer could refuse to renew your policy at a time when you would be unable to obtain replacement coverage, look for insurance that cannot be cancelled or is guaranteed renewable. You may be offered other types of renewal provisions, but protection below these levels usually is inadequate. Waiting Period. Sometimes called an elimina tion period, this refers to how long you have to wait after becoming disabled before benefits be gin. 90 days is standard, but a longer waiting pe riod can lower your premium. Inflation. Your policy should include a cost-of- living adjustment, so any benefit payments that last over an extended period can keep pace with infla tion. Waiver of Premium. Your policy should include a provision waiving the payment of future premi ums in the event of disability; otherwise, you would have to continue paying premiums while disabled in order to keep your insurance in effect. Definition of Illness/Sickness. Make sure your Q-Notes T May 26, 2001 T PAGE 13 policy covers illnesses when they are “first mani fest”, not when they are “first contracted” or “be gin.” With the latter, benefits can be denied for an illness contracted before coverage begins — even if it’s unknown at the time. This could be devastating for illnesses with long dormant peri ods like HIV or some forms of cancer. As an ex ample, with an IDS Life, IDS Life/New York dis ability contract, the definition of sickness also in cludes a situation in which you are reasonably and lawfully mandated by a state licensing board not to perform the material and substantial duties of your regular occupation because you have an in fectious disease as diagnosed by a physician. Many people receive disability insurance as a fringe benefit from an employer. Often, this is ad equate protection. If you have a policy at work, check to be sure it offers all the protection you need. Many insurance companies offer supplemental policies, both through your employer and in the private market, that can help bridge any gaps. Con sulting a financial advisor may help you determine whafs best for you. ▼ [American Express Financial Advisors Inc. Mem ber NASD. 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Q-notes (Charlotte, N.C.)
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May 26, 2001, edition 1
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