Disability Income and Medical Expense Insurance
Defining disability
Policies define disability as own occupation (unable to perform the duties of your specific job), any occupation (unable to perform any job for which you are reasonably suited by education, training, or experience), or a split definition - own occupation for the first two years, then any occupation. Own-occupation coverage is broader and costlier. Presumptive disability pays benefits for specified losses (loss of sight, hearing, speech, or two limbs) without an elimination period.
Benefit mechanics
Elimination period (waiting period) is the time between disability onset and benefit payment - longer means lower premium. Benefit period is how long benefits last (2 years, 5 years, to age 65). Benefits are typically 60–80% of gross income to preserve the incentive to return to work. Residual or partial disability benefits pay a reduced amount when income drops. Common riders: COLA, future increase option, and waiver of premium.
Business disability coverage
Key person disability replaces lost business value; business overhead expense pays rent, salaries, and utilities (not the owner's salary); disability buyout funds the purchase of a disabled owner's interest.
Medical expense insurance
Basic plans cover hospital, surgical, and physician expenses; major medical adds a deductible, coinsurance, and a stop-loss limit. Managed care controls cost through networks, preauthorization, and utilization review.
Trap and rule of thumb
Employer-paid premiums produce taxable benefits; individually paid premiums (or benefits from personally paid premiums) are income tax free. Rule of thumb: own-occupation usually lasts two years, then the definition tightens to any occupation.