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Protecting Against Disability

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March 15, 2012 by Milton Jones

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It is sometimes said that the Insurance Business is divided between those who insure Property Values and those who insure Human Life Values.

What do we mean when we say Human Life Values? Life & Health Agents are fond of saying that we protect against the risks associated with Premature Death, Disability, and Old Age. One of them is sure to get you! We can’t insure that these things won’t hap- pen, but we can arrange to replace some of the lost income.

It’s really a matter of Time and Money. We trade our time for money, and live on the money until we run out of time, or lose our ability to work.

Of the three risks mentioned, Disability is often the most economically devastating. It sounds cruel, but if you die your family can bury you and get on with their life. If you’re disabled, your paycheck has died but you are still a consumer. Chances of becoming disabled are about three times higher than for premature death. A leading cause of fore- closed homes is disability of the bread-win- ner.

So how can insurance compensate for a dis- ability? Different types of coverage include:

(1) Liability settlements If you are injured in a wreck, you may get a judgment against the other party’s auto liability coverage.

(2) Disability Income Insurance Perhaps you had group LTD (Long-Term Disability) on your job. Or, maybe you got Worker’s

Comp for a time because of a job-related disability.

(3) Indemnity Coverage One example would be your Accidental Death & Dismemberment (AD&D) coverage, which indemnifies you for loss of a limb.

(4) Waiver of Premium on your Life Insurance.

Let’s talk about number four, since that’s something about which many people are not familiar. When you buy personal life insurance, you may qualify for a Disability Waiver of Premium rider for a slightly extra premium. Many agents who sell on price alone will neglect this valuable feature.

What does it cost? Say you bought a $250,000 Term policy (when you were young and healthy) for a monthly premium of only $14.00 for the first 10 years. By adding only 92 cents, you could include waiver of premium. Then your policy would cost $14.92 monthly, but would be protected if you became totally disabled. The rider costs proportionately more if you’re older.
How does it work? Take the case the twin

brothers, Milt and Wilt, who were preferred risks at age 35. Milt bought a policy for $14 month, and Wilt bought the one with the waiver of premium rider. They both were disabled in the same accident, and are now age 55. Although he has been on Social Security disability, Milt’s family lost his policy several years ago. They couldn’t keep up the premiums on his policy, which would be over $200 monthly by now.

On the other hand, Wilt’s family still has the protection of his policy. The premiums have been waived since six months after his disability.

If possible, include disability waiver when you buy life insurance.

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