More than just Life Insurances

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Insurance, as we all know is a form of risk management primarily used to hedge
against the risk of potential financial loss. Insurance is defined as the equitable
transfer of the risk of a potential loss, from one entity to another, in exchange
for a premium and duty of care.
When we think of taking insurance what immediately strikes our mind are the
life insurances. Families often consider life insurance as necessary as a sound
roof when it comes to protecting them from the harsh winds of fate, especially
when children are small. Primary bread earners want assurance that even if worst
things happen, the house will be paid for and the youngsters can continue to
go to college.
But there are many worst things which can happen within one’s life period
like a disability that could knock the family provider out of the workplace.
While industry studies show that workers are three to five times more likely
to be disabled than die early, disability insurance is often neglected.
What is the point of having a life insurance if you are disabled? While premature
death tends to have a bigger emotional impact, disability can be equally, if
not more, devastating to a family's financial stability.
Disability can be long term or short term and can be broken down into a number
of broad sub categories.
  • Physical impairments affecting movement.

  • Lack of amputation of limbs or other body parts.

  • Sensory impairments, such as visual or hearing impairments

  • Neurological impairments.

  • Cognitive impairments.

  • Psychiatric conditions

    • The often heard “It won’t happen to me” has become a joke
    as daily someone or the other living in this world is diagnosed with some kind
    of a disease or other. For example Diabetics is one such kind of a disease that
    is common among youngsters today. Shocking to hear!!! But true facts are sometimes
    difficult to accept. With such a situation in hand, there is a high demand not
    only for life insurances but also disability insurances.

    Disability insurances are of two types;
  • Long Term Disability (LTD)
  • Short Term Disability(STD)
    Based on the type of disability, there are various different policies to suit
    you need and requirement.
  • Short-Term Disability policies (STD) have a waiting period of 0 to 14
    days with a maximum benefit period of no longer than two years.
  • Long-Term Disability policies (LTD) have a waiting period of several
    weeks to several months with a maximum benefit period ranging from a few years
    to the rest of your life.
    Disability policies have two different protection features that are important
    to understand.
    1. Noncancelable means the policy cannot be canceled by the insurance company,
    except for nonpayment of premiums. This gives you the right to renew the policy
    every year without an increase in the premium or a reduction in benefits.
    2. Guaranteed renewable gives you the right to renew the policy with the same
    benefits and not have the policy canceled by the company. However, your insurer
    has the right to increase your premiums as long as it does so for all other
    policyholders in the same rating class as you.
    In addition to the traditional disability policies, there are several options
    you should consider when purchasing a policy:
  • Additional purchase options
    Your insurance company gives you the right to buy additional insurance at a
    later time.
  • Coordination of benefits
    The amount of benefits you receive from your insurance company is dependent
    on other benefits you receive because of your disability. Your policy specifies
    a target amount you will receive from all the policies combined, so this policy
    will make up the difference not paid by other policies.
  • Cost of living adjustment (COLA)
    The COLA increases your disability benefits over time based on the increased
    cost of living measured by the Consumer Price Index. You will pay a higher premium
    if you select the COLA.

  • Residual or partial disability rider
    This provision allows you to return to work part-time, collect part of your
    salary and receive a partial disability payment if you are still partially disabled.

  • Return of premium
    This provision requires the insurance company to refund part of your premium
    if no claims are made for a specific period of time declared in the policy.