In a previous article I wrote about the importance of income protection planning for the professional real estate agent. The most economical method for protecting a Realtor’s income is through a disability insurance policy. To help you make an informed buying decision, I have provided the following information below:
- A Disability Income Insurance Checklist.
- A Disability Income Action Checklist.
- What Social Security benefits are available in the event of a disability.
A Disability Income Insurance Checklist:
With disability income insurance, you are purchasing an income stream provided by an insurance company in the event you become disabled. You must take into account your income needs, insurability, and premium paying ability. To better understand what features and benefits you are buying, consider the definitions listed below:
Benefit Amount. The monthly disability income benefit.
Waiting Period. Period of time you must you be disabled before the benefit begins. Common periods are 60, 90, 180, 365 or 730 consecutive days of disability. The shorter the waiting period the higher the premium.
Benefit Period. How long will benefits be paid? Common benefit periods are one year, two years, five years and to age 65.
Definition of Total Disability. How is a disability defined? The definition is usually divided between Total Disability and Partial Disability. Furthermore the definition of total disability can range from the inability to perform your own occupation to the inability to work in any reasonable occupation based on your education, training and experience.
Partial Disability Benefit. Does the policy provide benefits for a partial disability, if you can still work part-time? Do you have to experience a Total Disability first before receiving partial benefits? What requirements must be met?
Rehabilitation Benefits. Does the policy pay any of the expenses of a rehabilitation program?
Waiver of Premium. Will policy premiums be waived during a disability?
Renewability. Is the policy guaranteed renewable? Under what conditions can premiums be increased?
Other Benefits to Consider.
- Additional Purchase Option: Right to purchase additional disability income protection without evidence of insurability.
- Social Security Rider: Replaces Social Security benefit if you do not qualify.
- Cost of Living Rider: When disabled, your monthly check increases benefit each year to offset increases in the cost of living.
Disability Income Action Checklist
- Estimate the amount of monthly income you will need in the event of disability.
- Estimate the disability income that will be available to you from sources such as: Employer-Provided Short- and Long-Term Disability Benefits and Social Security (submit Form SSA-7004 to the Social Security Administration in order to receive an “Earnings and Benefit Statement”)
- Determine the additional monthly income required to achieve your disability income objective.
Four Step Disability Income Implementation Plan
- Select type of policy and amount of personally-owned disability income insurance.
- Evaluate and select appropriate optional benefits.
- Establish insurability.
- Arrange for payment of premiums.
What Social Security Benefits Are Available in the Event of a Disability?
- While almost everyone in the United States who is employed or self-employed is covered by Social Security, qualifying for disability benefit payments can be difficult for the self employed Realtor. The prudent Realtor protects their income with personally owned disability insurance. Let’s take a look at Social security eligibility to receive disability payments.
- To qualify for monthly Social Security disability benefits, you must be under age 65 and so severely disabled that you cannot perform any meaningful work. You must also have a minimum number of quarters of Social Security coverage, based on your year of birth. If you are eligible, you won’t see any benefits until the sixth full month of disability. I know about the difficulty in qualifying for Social Security disability benefits. I had life threatening brain surgery to repair a ruptured aneurysm and was flat on my back for at least 12 months and could not qualify for benefits.
- In fact, from 2000 through 2009, an average of 55% of Social Security disability claims were denied, (Source: Annual Statistical Report on the Social Security Disability Program, 2010; released August 2011).
- The average monthly Social Security disability benefit received in 2011 was $1,111. (Source: Annual Statistical Report on the Social Security Disability Program, 2011; released July 2012).
Designing the right Disability Policy is not a "do it yourself" project. You should always seek the advice of a licensed, insurance professional.