What Is A Benefit Period?

What is a benefit period? When considering whether to invest in a private long term disability insurance policy, one of the issues is how long will you need benefits to be paid. This question was posed to...

This question was posed to Mark Webb, Executive Vice President, Governmental Relations, of Employers Direct Insurance Company. "When considering whether to invest in a private long term disability insurance policy," Webb replies, "one of the issues is how long will you need benefits to be paid. While this may seem to involve a high degree of speculation, including whether you will get disabled at all, it actually boils down to the probability of whether you will be disabled and, in the unfortunate event of your becoming permanently disabled, whether benefits to age 65 are worth the additional premium rather than having a shorter benefit period and utilizing other benefit plans such as Social Security or your pension disability retirement benefit."

As Webb explains, "Your long term disability planning also involves a thorough analysis of a number of benefits you may be entitled to depending on your current employment and the nature of your injury. If you are injured at work, then much of your disability will be covered by workers' compensation insurance provided by your employer, usually at no cost to you. If you are totally disabled, then Social Security provides benefits that reflective of your income and the number of years that you have been paying into the Social Security system. Depending on the state in which you live, you may also be able to secure benefits from your state retirement system if you are a public employee. Such benefits will be applied either for occupational or non-occupational injuries or illnesses."

"Benefit periods for disability insurance products can be as little as two years or as extensive as lifetime benefits beyond the age of 65," Webb continues. "Most policies extend long term disability benefits up to age 65, although a 5 year benefit period is also a popular option because it covers the overwhelming majority of long term disabilities. In addition to these considerations, disability insurance terms may differentiate between disabilities that are arising out of accidents as opposed to those arising that are out of diseases. Basic long term disability plans offered through your employer may have a benefit period of 60 months (5 years) and allow an optional benefit period with additional premium for payment of benefits up to age 65."

"Remember that the benefit period is one of a number of considerations you need to take into account before buying a disability insurance policy or adding benefits to a policy provided to you by your employer," Webb advises. "A shorter benefit period may be at odds with decisions you make regarding a waiting period or the amount of resources that you may have, including the accrual of sick leave and vacation time that could be applied to providing you with income during the early stages of recovery from an accident or illness. To make the best decision regarding your disability insurance needs, talk to an insurance agent as well as a financial planner. Your benefits coordinator at work is also a valuable resource for information on planning for your disability needs."

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