Disability Income and Medical Expense Insurance
Disability income
Disability income replaces part of earned income, typically 60 to 70%, and never the full amount, or the insured has no incentive to return to work. Key definitions: own occupation (more generous, often limited to the first two years) versus any occupation; total versus partial versus residual disability. The elimination period is the waiting period before benefits begin; the benefit period is how long they last. Occupation classes drive price, with professionals paying less than laborers.
Policy types
- Noncancellable: the insurer cannot cancel or raise premiums and must renew.
- Guaranteed renewable: renewal is guaranteed, but the insurer may raise premiums for an entire class.
- Optionally renewable and conditionally renewable: weaker guarantees.
Medical expense insurance
Basic coverage pays hospital, surgical, and physician expenses. Major medical adds a deductible, coinsurance (often 80/20), and a stop-loss or out-of-pocket maximum. Inside limits cap specific services. Supplemental products include hospital indemnity, cancer, critical illness, dental, vision, and accident policies.
Long-term care
LTC pays for custodial care when the insured cannot perform at least two of six activities of daily living or has a cognitive impairment. Medicare does not cover custodial long-term care.
Traps
Offset provisions (Social Security, workers' compensation) reduce benefits. Noncancellable does not mean the insurer may cut premiums, and guaranteed renewable does not guarantee rates.
Rule of thumb
Noncancellable equals guaranteed renewal plus premiums the insurer cannot increase. If either piece is missing, it is not noncancellable.