Disability policy can ease pain of a calamity


SANTA ANA, Calif. -- Having built a successful dental practice in the mountain community of Wrightwood, Calif., Mary Samida decided to protect her investment six years ago by taking out a disability-insurance policy.

It was a good thing, because last December, increasing pain in her back caused by ruptured discs forced Ms. Samida out of her profession of 15 years.

"It was kind of a jolt," she said. "I'm having to sell my practice and immediately quit dentistry."

The shock of ending her career so suddenly has been greatly eased by a disability-insurance policy that will pay Ms. Samida the equivalent of her monthly take-home pay every month for the rest of her life.

"I'll be able to have another career at some point, but I won't be restricted by having my disability benefits stop," said Ms. Samida, 51, who expects to undergo several more months of therapy.

Such are the benefits of individual disability policies, which offer a substantially wider array of benefits than plans typically offered through the workplace.

Most group or government-supported insurance won't bail out a person struck by a career-halting injury.

They usually don't provide a large amount of money. And, generally, injured workers are protected in their area of specialty for only two years. After that, the benefits and job classification can be downgraded significantly.

Don't count on much help from Uncle Sam. More than 70 percent of the applications for Social Security disability insurance are rejected, according to the Journal of Accountancy.

Under Social Security's broad guidelines, an applicant's injury must be so severe that he cannot perform any "meaningful" job. In addition, the disability must be expected to last at least a year or result in death.

That leaves the risk of losing your paycheck because of illness or injury to individual disability-insurance plans. But buying it isn't cheap or easy.

Individual disability plans are typically thought to be ideal for professionals such as doctors, lawyers, dentists, accountants and architects, who have sizable incomes and asset portfolios that would be grossly underinsured by most group plans.

But when considering, for example, that it's more likely that young and middle-aged people will be disabled than die, some )) insurance experts say more thought should be directed at disability protection.

Here are things to consider before buying an individual disability policy:

* The size of the policy. "How long could you survive living off your present assets? And do you want to?" Those are the first two questions that Steve Stack, spokesman for the Orange County, Calif., chapter of Chartered Life Underwriters, asks clients who are examining disability insurance.

An inventory of household savings -- plus workplace benefits such as disability coverage or unused sick days -- should be made. How much insurance you require depends on your income, liabilities and how much -- if any -- you're willing to change your lifestyle if calamity strikes.

Most insurers offer policies that pay 60 percent of one's monthly income. They rarely pay more, fearing that it would discourage some from returning to work.

* The cost. Though inexpensive compared with the potential long-term payout, disability policies aren't cheap as part of a monthly budget.

As a rule, the annual premium should equal about half the monthly benefit, says John M. Sawyer, a marketing vice president at New York-based Guardian Life Insurance Co. of America.

For example, a 40-year-old professional would pay about $2,460 a year -- $205 a month -- to receive a monthly benefit of $5,000 under Guardian's Provider Plus policy. The premium assumes monthly payments beginning three months after the policyholder becomes disabled and lasting through age 65, and does not include cost-of-living increases.

The price of the policy can be reduced by accepting longer waiting periods for the payouts to begin.

* Other benefits. There are a host of add-ons, or riders, that make individual plans more distinguishable from group ones.

Guaranteed renewable features allow the holder to keep the policy in force through a certain age. The insurer cannot amend or cancel any of the terms of the policy.

Non-cancelable clauses give the holder the right to renew the policy at the same price for a certain number of years.

Residual benefits are paid to workers who have returned to work but haven't fully recovered from the injury or illness. That allows them to recoup the difference between what they were making when they were healthy and what they're earning while working part time.

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