How does health insurance work?
In order for health insurance benefits to be paid, you must meet your policy’s definition of disabled. How strict the definition is can vary between plans.
There are three common definitions:
- Own professional disability
- Changed disability for own business
- Disabilities in all occupations
Functional disability in own profession
According to the definition of occupational health insurance, you receive benefits if you are unable to work in your “own occupation”, regardless of whether you are employed in another occupation. This is the most common definition used and more flexible for the policyholder.
Pete is a surgeon who enjoys doing home improvement projects in his spare time. One day Pete̵
7;s hand slips while using his table saw and the accident requires a finger amputation. Pete can no longer perform surgeries, but may be able to find work in another medical specialty or even work outside of the medical industry.Pete is unable to perform the essential duties of his own profession as a surgeon. With health insurance for his own business, he would receive full benefits, regardless of whether he chooses to work in another medical specialty or a completely different profession.
Modified Own vocational disability
This definition is similar to self-employment, but the full benefit is only paid if you are not working. If you choose to work, the benefits from the insurance will be reduced proportionally. This definition can also be called “own occupation if not working”.
Cassie is a lawyer at a law firm. During a routine health check, she was diagnosed with stage II breast cancer.
Cassie is unable to work due to her treatment schedule and side effects of nausea. Her health insurance gives her full benefits.
After a few months, her doctor says she can go back to work part-time. Her sickness benefit continues but is reduced by income she now receives from work.
Disabilities in all occupations
Under the definition of health insurance for all occupations, you only receive benefits if you are unable to work in a job that is reasonably suitable for you based on your education, experience and age. In other words, if you are still able to work, even at a lower paying job, it would not pay to work in any occupation.
John is a dentist who enjoys doing home landscaping projects in his spare time. One day, John’s hand is accidentally crushed under a cinder block while building a retaining wall, causing nerve damage. John can no longer perform precision dentistry, but may be able to find work in another medical specialty or even work outside of the medical industry.
Since John can still work in the medical field, he would not receive any benefits if he had health insurance for all occupations.
How does the disability allowance work?
Monthly disability benefit amounts typically range from $500 to $20,000 – maximum limits depending on your occupation and salary. These benefits are paid tax-free if you pay the premiums yourself (against an employer) with after-tax.
There are special provisions to be aware of in your health insurance.
Disability insurance waiting period
If you become disabled, you will start receiving the benefits specified in your policy. However, there is often a waiting period before payments begin.
Common waiting times are 30, 60, 90, 180 and 365 days. A few policies are available with a 0-day waiting period but this is only for disability arising from an accident.
Health insurance policies with a shorter waiting period have higher premiums. If you have the ability to pay for typical living expenses for a few months with a disability, you can save money by purchasing disability insurance with a longer waiting period.
For example, the annual premium for a policy with a 180-day waiting period can be less than half the cost of a policy with a 30-day waiting period.
Disability insurance benefit period
Just as health insurance policies have different grace periods, they also have different compensation periods. A benefit period is the time during which an insurance company will provide funds to an individual when he or she becomes disabled.
Benefit periods can include one year, 2 years, 3 years, 5 years, 10 years, until age 65 or 67, or even the insured’s lifetime. Not all insurance companies offer all of these options.
The health insurance will continue as long as you are disabled according to the insurance’s provisions. The insurance company will likely require proof of continued disability if the duration is long. The benefits from disability insurance cease when you are no longer considered disabled.
The longer the compensation period, the higher the premium. For example, premiums for a policy with a 2-year replacement period can be 40-50% cheaper than a policy with a replacement period that extends to age 67.
How much does health insurance cost?
The cost of health insurance varies from person to person. It can cost as little as 1% of your income.
The cost of your insurance will be determined through underwriting.
Disability insurance basics
Here at Quotacy, our world primarily revolves around life insurance. But life insurance and health insurance are similar in the way that they are both designed to protect income.
» Compare: life insurance quotes
Life insurance protects your loved ones from financial difficulties in the event of your death, and health insurance protects you, and in turn your loved ones, from financial difficulties in the event of a disability that prevents you from working. However, they are not guaranteed in the same way.
Life insurance guarantee means mortality risk, basically the assessment of medical impairments and how they may relate to premature death. Disability insurance subscription means morbidity risk, basically assessing medical impairments that may result in long-term disability. As an example, a painful back will not cause a person’s death, but back problems are a major cause of disability.
There are three levels of disability insurance:
- Occupation
- Medical
- Financial
Occupation
For health insurance, it is crucial to classify an applicant in the correct occupational class in order to determine the correct compensation amount and premium rate. When determining occupational classification, there are five important factors:
- Job duties
- Environment
- Income
- Stability
- Dual occupations
Common questions asked when applying for health insurance are:
- What is your typical day like?
- If you work with manual tasks, what are they and what percentage of time do they represent?
- Do you have ownership? If so, how many employees?
- Do you work multiple jobs?
- How many hours do you work?
Higher occupational classes usually perform less manual tasks.
The table below shows some examples of the various occupational classes.
Source link
