DISABILITY CONCEPT DEFINITIONS
Terms to help you understand how disability coverage works.
WHAT ARE POLICY RIDERS?
The max monthly payment you receive for an approved claim based on your income This amount is typically received tax-free BENEFIT AMOUNT
WAITING PERIOD
The amount of time you must wait after the onset of an illness or injury before monthly benefits on a new claim can be paid
The max amount of time you can receive benefits on a claim while disabled. BENEFIT PERIOD
Riders are optional plan provisions/add-ons that modify your policy’s basic coverage These can include options like
RESIDUAL/PARTIAL
Pays partial benefits if you can still work but not at full capacity, causing your income to be reduced by at least 15-20% depending on the carrier.
COLA
Increases your monthly benefit each year to keep up with inflation Typically starts at 3% in the second year of an active claim
OWN OCCUPATION
Pays full benefits if you're unable to work in your specialty, even if you can work in another field Without it, any earnings from another specialty would impact your paid benefit
FUTURE INSURABILITY
Lets you increase your coverage later without another medical exam or health questions Premium rates for future increases are based on your age at the time of the increase Available terms and rider types can vary by carrier
LEVEL VS. GRADED PREMIUMS - WHAT’S THE DIFFERENCE?
Level premiums are based on your starting benefit amount and stay the same for the life of your policy.
Graded premiums start lower and increase as you age.
A FEW THINGS TO KEEP IN MIND...
UNDERSTANDING LIFE INSURANCE
How basic life insurance works and what affects your coverage options.
TERM VS. PERMANENT LIFE - WHAT’S THE DIFFERENCE?
TERM LIFE
This type of policy offers coverage for a fixed period (usually 10 to 30 years) and is designed purely to provide a death benefit, which is received tax-free
Typically the most affordable option, it’s ideal for protecting income or paying off debts in the high-responsibility years
These will not accrue cash value, so the policy will expire without a death benefit payout if you outlive the term
PERMANENT LIFE
Permanent coverage stays in effect for your entire life as long as premiums are paid These policies also build cash value, which grows over time on a taxdeferred basis and can be accessed later for retirement income, other financial goals, or even it’s own premium payments Beyond the death benefit, it can often be used as a tool in estate or long-term financial planning
The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any federal tax penalties. Tax and legal advice offered through Financial Designs Tax Services, LLC and Financial Designs Legal Services, LLC. Members of Financial Designs, Inc. who are also Cambridge representatives do not offer tax or legal services. Please see your tax or legal advisor. Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Advisory services offered through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Financial Designs, Inc., Financial Designs Tax Services, LLC and Financial Designs Legal Services, LLC are not subsidiaries or affiliates of Cambridge Investment Research, Inc. Cambridge Investment Research, Inc. does not offer tax or legal advice.