An individual disability policy pays a percentage of the insured’s income based on policy guidelines if they are sick or hurt and unable to work.
Individual disability plans (IDI) can be customized based on the client’s needs.
- Amount the policy will pay (not in excess of 60% of the insured’s pre-tax income).
Waiting period (elimination period) How long the insured will need to be disabled prior to receiving payment.
- Benefit period (how long the insured will receive payments if they are continuously disabled).
- Definition of Disability (How the insurer defines the insured’s inability to work such as own-occupation, modified own occupation of any occupation).
- Renewal provisions of the policy (non-cancellable or guaranteed renewable)
- Riders (additional features such as cost of living adjustment, residual disability payments or future purchase options).
Multi-Life Disability Insurance
An individual policy that provides a discounted rate if 3 or more individuals within the same company purchase a plan with the same insurance carrier. Individual underwriting rules still apply to these policies.
Simplified Issue Disability Insurance
Individual DI plan with capped benefit monthly benefit amount. Perfect tool for protecting the essentials of the insured’s expenses such as mortgage, utilities and groceries.
These plans are often issued with no exams, bloodwork, inspection reports or tax returns and can be issued in as little as 48 hours.
Business Overhead Expense (BOE)
BOE covers an essential owner’s overhead expense in the event they are sick or hurt and can’t work. This is a reimbursement contract. It is designed to keep the doors of the business open while the owner recovers.
BOE generally covers rent, utilities, salaries (excluding owner), interest of some types of debt, office equipment and maintenance, payroll and property tax, professional membership dues, accounting fees and insurance premium for employees. In certain instances, the policy may also pay for the hire of a temporary replacement of the disabled owner.
Premiums of BOE are deductible as a business expense. Benefits paid are taxable.
Disability Buy Sell
Provides payment to the corporation or other owners to purchase the disabled owners’ share of the business.
Disability Buy Sell is not deductible as a business expense. Benefits paid are non-taxable. Benefits can be paid over time or in a lump sum. Business valuations are based on a formula derived by the insurance carrier.
Key Person Disability Insurance
- Policies can be purchased on multiple employees
- Benefit payouts are from 12-24 months
- Benefits will be paid until the person returns to work, is permanently replaced or the benefit period is exhausted.
Retirement Plan Disability Insurance
- Funds are distributed to the client at age 65 or 67.
Bank Loan Disability Insurance
Provides payments directly to the bank during a period of disability to ensure that existing loans do not fall behind during a period of disability.
Impaired Risk Disability Insurance
- Premiums for these policies tend to be higher due to the increased risk.
Critical Illness (CI)
CI provides a lump sum payment for a series of critical illnesses. Some examples are Cancer, heart attack, stroke, illness induced coma and Alzheimer’s disease. The covered illnesses are defined in the policy.
This is a great option for a non-working spouse that cannot qualify for individual disability insurance.