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Disability Insurance Frequently Asked Questions

» What is “True Own Occupation” Disability Insurance?

If you are researching disability insurance you have probably heard about “True Own Occupation” coverage or “Own-Occ” coverage. One of the most important things you need to decide is if you want to pursue this type of coverage. It can be really important for certain occupations.

What is “Own Occ” Disability Insurance?

When people talk about Own Occupation Disability Insurance they are referring to the definition of total disability in the actual disability insurance contract. True Own-Occupation coverage is usually the strongest definition of disability available. With this type of coverage you are protected if you have a medical condition that does not allow you to work in your current occupation – EVEN IF YOU CAN WORK IN ANOTHER OCCUPATION. That means with Own-Occupation coverage your policy will pay your disability benefits for a wide range of medical conditions that might otherwise not be considered as “disabling.” This type of coverage is really important for highly specialized occupations. Own Occupation Disability Insurance is truly insuring your ability to perform a specialized task.

Example of True Own Occupation Disability Insurance

Let’s say you are a Physician Assistant. A major part of your job is using your vision and your hands to assist in surgery. If you lost vision in one of your eyes would you be able to perform your job? With vision in only one eye you would not have depth perception and it would be dangerous to use scalpels and other medical devices during surgery. Losing vision in one eye isn’t commonly thought of as a permanent disability. Plenty of people have great lives and make a lot of money even though they only have vision in one eye. For a physician assistant, however, losing that vision would be truly disabling.

If a physician assistant had a True Own Occupation Disability Insurance Policy, they would be eligible for their full disability benefit. The insurance company would not ask them to go get another job. The benefits would pay even if they went and got another job – regardless of how much money they made.

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» What are the odds of becoming disabled?

The odds of becoming disabled from work are pretty surprising to most people. An independent source of disability statistics can be viewed here.

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» Can disability insurance pay for overhead expenses in my business?

Disability insurance can be an absolute life-saver when it comes to paying your personal monthly expenses after a sickness or injury. But what if you own a business with monthly overhead expenses that also need to be met? You may also need business overhead expense coverage.

When you own a business you are not only on the hook for your own personal household expenses – you are also responsible for covering the overhead expenses incurred by your business. If you own the type of business that would experience a loss of revenue if you personally could not work then you should consider buying business overhead expense disability insurance.

Many insurance carriers will offer up to $50,000 per month in business overhead re-reimbursement coverage. This coverage will simply reimburse you for the overhead you pay for while on claim. The coverage has a lower cost than you might imagine and the premium is tax deductible.

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» What is disability insurance?

Disability insurance is a type of financial protection designed to protect a person who is dependent on their income. At Montana Life Group we feel that disability insurance is one of the most important types of coverage a working person can have. Unlike workers compensation, disability insurance will actually pay a person an ongoing monthly income benefit for injuries or sicknesses that occur outside of the workplace.

Disability insurance is so often overlooked as an essential part of a financial plan. Most people depend on the income they receive from their job or business. What would happen if a person came down with a serious illness and had to miss work for an extended period of time? We all know that health insurance can cover the cost of expensive medical bills but where will the money come from to pay bills like mortgage, utilities, health insurance premiums, and other general costs of living like food and clothing?

Disability insurance can typically provide up to 60% of a person’s previous year’s salary as a tax free¹benefit that can continue for as long as a person is out of work or until a certain age (for instance until age 65). Let’s look at a disability insurance example:

A 39 year old non-smoker attorney in Billings, Montana is currently at work full-time and bringing in $100,000 per year. This person can probably qualify for a $5,000 per month disability policy if they are healthy. The monthly cost for this person’s disability insurance policy would be about $139 per month² . If the attorney becomes ill and can no longer perform their duties as an attorney they would begin to receive $5,000 per month after 90 days and the policy would continue to pay $5,000 per month until the attorney returns to work or turns 65.

Of course this is a broad and simplified example, but it is a scenario many Americans face every year.

At Montana Life Group we focus on three types of insurance, all designed to provide financial security. While life insurance serves as protection in the event of death, the risk of a becoming disabled is far more likely³, therefore disability insurance is important to consider for any working individual.

Disability benefits are tax free only if premiums are paid by the insured with after tax dollars
Based on rates current as of 5/29/13 assuming a 90 day elimination period and age 65 benefit period with no additional riders
Workers today are 3 times more likely to suffer a long-term disability than die during their working years (Source: The Council of Disability Insurers, The Long Term Disability Claims Review: 2005)

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» How are disability benefits taxed?

Disability benefits received from a long term disability insurance policy can be either tax free or taxable as regular income. The important determining factor is how the disability premiums were paid prior to the disability claim.

If an individual person paid for the premiums for their disability insurance policy out-of-pocket with their own after-tax dollars, then disability income benefits are not considered taxable income.

Conversely, if a person’s long term disability policy was provided as an employee benefit and paid for by an employer, then any disability income benefits are considered insured taxable income. There are scenarios when an employer can provide long term disability coverage and include the disability premiums as part of the employee’s compensation plan in order to ensure future disability benefits are not treated as taxable income.

It is important to consider the tax treatment on potential future disability benefits when determining the correct amount of coverage to apply for.

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Disability Insurance is extremely important for anyone who financially depends on the income they earn through work. At Montana Life Group our philosophy is that disability insurance is one of the most important types of financial protection a working person should have. If you are interested in looking at disability insurance options and pricing, just request a disability insurance quote or send us an email. We have several discounted programs available for specific occupations. We have occupational disability insurance discounts for medical professionals, veterinarians, lawyers, CPAs, engineers, and other specialized occupations.

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Disability Insurance Insures Your Income

Your most important asset is your ability to earn an income. Let’s say you make $60K per year and you are planning on working full time for the next 20 years. Assuming no increases in salary that would equate to $1,200,000 of earnings you will bring in during your working career. You and your family depend on that money – doesn’t it make sense to insure it?

Illnesses, injuries and accidents occur every day. How long could you live off savings if you needed to recover from an injury and you couldn’t work? Would you be able to pay your bills if you had to wage a battle against cancer and you had to miss a lot of work?

Disability insurance pays you a monthly tax-free income if you are out of work because of a health issue. Disability insurance serves as protection for the dentist who is concerned about getting arthritis. It can safeguard an attorney or CPA who is concerned about potential mental illness. Disability insurance can even cover the software engineer who is concerned about injury because he loves to mountain bike.

Do I Need Disability Insurance?

If you depend on your income the answer is probably yes. Most people are surprised to learn how likely it is to suffer a disabling injury or sickness. You should take a look at the odds of becoming disabled. Want to find out your personal risk of disability? Calculate your Personal Disability Quotient.

Long Term Disability Insurance

Long term disability insurance is probably the most important type of disability insurance to consider buying. It is also often overlooked. Many Americans misunderstand long term disability insurance just because of the name, so let’s call it “LTD.” LTD can cover a huge range of illnesses and injuries and they don’t have to be long term, multi-year disabilities. The “Long Term” in the name is referring to the amount of time that a policy could potentially pay benefits. Many LTD policies offer benefits that can pay for over 40 years. Those same policies also offer adequate coverage for shorter term health issues with recovery times of less than a year. To find out what options are available for your situation request a custom disability insurance quote.

Short Term Disability Insurance

Short term disability insurance can provides income for a few weeks or up to 2 years depending on what type of policy you have. Short term policies can be provided through work as an inexpensive benefit or they can be purchased individually. Typically short term policies are less expensive and do not require a medical exam. Request a disability insurance quote.

Own Occupation Disability Insurance

There are many different factors to consider when choosing a disability insurance plan. One of the most important things to consider is whether or not to select an “own occupation” policy (also known as “own-occ”). This policy can pay you a disability benefit if you are unable to do your current job – even if you could possibly do another job. It is equally important to consider buying certain optional riders, such as a “non-cancelable, guaranteed renewable policy” with a “partial disability rider.” We can help you learn about these important features.

Employer Group Disability Insurance

One popular form of disability insurance is “Group Disability Insurance” provided by an employer. Some employers offer group disability insurance as a benefit in order to attract workers. The cost of the insurance can be either paid by the employer or the individual employee depending on the employer’s preference. We specialize in these voluntary group disability insurance programs for companies. Regardless of whether the programs requires that employees pay for the disability insurance coverage at their own expense or the company provides it as a benefit, it comes as a significant discount.

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Offering a group disability insurance program can be a fantastic and responsible benefit for employees. If you would like to discuss adding a group disability insurance program to your company or employer’s benefit package please contact us.

Discounted Disability Insurance

We have several programs for offering disability insurance at a discounted rate. Typically the discounts are extended to occupational associations, companies, and some specific occupations like medical professionals, veterinarians, attorneys, and CPAs. If you are in an association or company that wants to look at a discounted disability insurance program, let us know by contacting us.

Greg Burden
Income Protection Specialist

Greg Burden is one of the most experienced disability income specialists in the entire country. His expertise includes solutions for individuals and families as well as business partnerships and other complex situations. Greg is the founding principal of Owl Insurance Solutions, a firm dedicated specifically to ensuring that clients are protected from the devastating effects a sickness or injury can cause to an otherwise normal financial situation.

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Summary

Service Type

Disability Insurance

Provider Name

Montana Life Group,

Area

Available in most states.

Description

Disability Insurance is extremely important for anyone who financially depends on the income they earn through work.

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Disclosure: As with any insurance policy, it’s critical to take into account the financial soundness of the disability insurance carrier. Be sure to read all disclosures and definitions when applying for a disability insurance policy. We highly recommend including own-occupation rider, partial disability rider and non-cancelable/ guaranteed renewable rider on all policies. Those provisions may not be available for all occupations. At Montana Life Group we have access to dozens of insurance carriers and can help you choose the policy that fits your needs and budget.

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