Financial Literacy for Everyone
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Disability

Humans are amazingly adaptive. But sometimes it takes a long time to recover from unexpected circumstances. Car crashes. Heart attacks. Random acts of violence. Back injuries. Cancer. These can have long lasting impact on our ability to perform our jobs and earn money.

Your employer may offer you a few weeks of paid leave when you initially become incapacitated. But what if you still cannot work after that? Your ability to support your family and service your mortgage may be impacted.

You can protect yourself from the financial effects of these situations with long-term disability insurance. The ability to earn a living is often the most valuable asset for adults and it is critical for you to get coverage.

Disability Coverage Provided by Employer
Check with your employer. You may already have long-term disability coverage. Many employees do not even know it. If you do, make sure you know how well you are covered. You do not want to wait until you really need the benefits to discover gaps in the coverage.

Government Welfare Support
The Comprehensive Social Security Assistance Scheme, administered by the Social Welfare Department, offers financial support to disabled residents in Hong Kong. Applicants will be means-tested and the level of support will be dependent on the disability. Additionally, disabled residents may also apply for additional grants to meet specific needs, including transport, medical and rents. Please click here to see the Social Welfare Department’s website for more details.

Disabled residents who are not receiving support from the Comprehensive Social Security Assistance Scheme may apply for benefits under the Social Security Allowance Scheme. The allowance scheme offers flat-rate financial support for qualified applicants.

Personal Disability Insurance Policy
Policies vary considerably from one to another. Make sure you know how well you are covered so that you can prepare around your policy. If your benefits are not great, you should increase your coverage, or save up more in your emergency fund.

  • Benefit Amount – Some policies will pay the insured a monthly income in the event of disability. The higher the premiums, the higher the payout. Decide on the appropriate benefit amount by assessing your needs if disability strikes and the premiums you are prepared to pay. Your insurer can offer you options based on your current income level.
  • Term of Benefits – Check for how long your benefits will be paid. Some policies will cover you for only a certain period. Others provide lifelong benefits. You can lower your premiums by reducing the term of your benefits.
  • Premium – The amount you will pay for your coverage depends on so many variables that it is impossible to list them all here. But some of the main factors are your age, your gender (on average, women live longer - longer benefit payments mean higher premiums), your job (how dangerous is it?), your income (how much will they have to pay out?), your medical history and your lifestyle.
  • Own Occupation – This is an important designation on your policy that determines what it means to be disabled. "Own occupation" means that you are disabled when you are unable to perform your current job. "Any occupation" means that you are disabled when you cannot perform any job. Obviously "own occupation" is preferable but it is also more expensive.
  • Waiting Period – The waiting period is how long you will wait after you are disabled to start receiving benefits. Most policies have at least a 30-day elimination period before they start paying you benefits. Otherwise, if you missed one day from work, they would have to pay you for that day. But other policies will wait even longer to start paying – 60, 90 or even 120 days. The longer the waiting period, the lower the premium. To determine how long a waiting period you should get, figure out how long you could go without earning income. If you have a claim, file it as soon as possible. That will start the waiting period and start your benefits faster.
  • Residual Benefits – Some policies will offer lower amounts for less than complete disability. The wording of the policy can sound very morbid – 20% for loss of an eye, 40% for loss of a limb and an eye, etc.