Moon Insurance Managers, Inc. · TDI license #5595
Disability insurance is sold on a simple promise: if you cannot work, it replaces part of your income. The promise is accurate. It is also not what the policy says.
A disability policy pays on a definition — a specific test, written into the contract, that your situation either meets or does not. Two policies with the same monthly benefit can behave completely differently at claim time because their definitions differ. So this page starts with the four provisions that decide whether a policy pays, and gets to the monthly benefit last.
Read these four sections
Before you compare a premium, read these four sections of the contract. They are where the answers live.
This is the provision that matters most, and it is the one that varies most between contracts. There is no standardized wording — the shapes below are conventions carriers use, not legal categories, and two policies using the same label can define it differently. Read the actual sentence in the actual policy.
The question to ask, in these words: if I could not do my own job but could do some other job, does this policy pay — and does the answer change after a few years?
The number of days between the disability beginning and benefits becoming payable. It works like a deductible measured in days rather than dollars. Two things about it are commonly misread, and they are two different clocks.
Also ask what happens if you recover, go back to work, and the same condition returns. Many policies carry a recurrent disability provision that treats it as a continuation rather than a new claim, so a second elimination period is not owed. Whether yours does is a contract question.
How long the policy pays once it has started. Common options run for a fixed number of years, to a stated age, or to Social Security normal retirement age.
This is the provision that decides whether the policy is designed to handle a bad year or a changed life. A two-year benefit period is a serious product with a serious job — it covers the period most disabilities actually last. It is not the same product as one that pays to retirement age, and comparing their premiums as though they were is the most common pricing mistake in this market.
What the carrier is allowed to change after the policy is issued.
The labels are common across the market, but the operative language is in your contract. Ask which one you are being offered, and ask what specifically the carrier may change.
The one to ask about
The picture in everyone’s head is total disability: unable to work at all. The claim that happens far more often is partial — back at work, doing less, earning less.
A residual or partial disability provision is what responds to that. It measures the income you have lost against what you used to earn and pays a proportion of the benefit. Without one, a policy is close to all-or-nothing: you are either disabled under the definition or you are not, and a 40% income loss may produce nothing at all.
If you take one question to a conversation about disability insurance, make it this one: what does this policy pay if I go back to work part-time at reduced earnings?
Two different contracts
Group long-term disability through an employer and an individually owned policy are different contracts, and the differences are worth understanding before you decide you are covered.
A group certificate belongs to the plan. An individual policy belongs to you and goes with you when the job does.
The group plan’s definition was chosen by the employer and the carrier. You did not negotiate it and you can rarely change it.
Under federal tax law, amounts received through accident or health insurance for personal injuries or sickness are generally excluded from gross income except where they are attributable to employer contributions that were not included in your income, or are paid by the employer. In practice, benefits from a policy you paid for with after-tax dollars are generally excluded; benefits from employer-paid group coverage generally are not.
The consequence is arithmetic. A group benefit stated as a percentage of income is worth less in your hand than the same percentage bought individually, because one is generally taxable and the other generally is not. That does not make either one better. It makes them not directly comparable on the stated percentage, which is exactly how they are usually compared.
We are not going to tell you that group coverage is inadequate or that you need to replace it. Very often the sensible answer is to keep the group coverage and understand its limits. What we will do is read both contracts against the four provisions above and tell you what each one actually does.
Source: 26 U.S.C. § 104(a)(3) — compensation for injuries or sickness. Verified .
On the job, off the job
Texas is unusual, and it matters here.
Workers’ compensation coverage is elective for most private employers in Texas — an employer that has not elected to carry it is a non-subscriber, and that is a lawful status rather than a failure to comply. If you work for one, there is no workers’ compensation benefit waiting for an injury that happens on the job.
Either way, an individual disability policy is generally written for the injury or illness that happens away from work. If your question is about an on-the-job injury, that is a different subject with different rules, and our workers’ compensation page covers it.
Source: Tex. Labor Code § 406.002 — elective coverage. Verified .
Plainly
This page does not produce a price. Disability insurance is individually underwritten, and a real number depends on your occupation, your age, the definition you choose, the elimination and benefit periods, and medical underwriting. Anyone quoting you a figure before those exist is quoting a different policy.
What we do is read the four provisions in whatever you are being offered, or in whatever you already hold, and tell you plainly what they say.
Our form does not ask for health information. Not your diagnosis, not your medications, not your height and weight. Those questions belong in an application, with a licensed agent, in a process built to handle them — not in a web form.
360 FM 1959, Houston, TX 77034 · (281) 484-8320
It means the policy tests whether you can do the material duties of your own occupation rather than any occupation. It is not standardized — the wording varies by contract, and several common variants attach conditions or switch to an any-occupation test after a period of years. That is why the definition is the first thing this page discusses.
Two separate clocks. The elimination period is the number of days between the disability beginning and benefits becoming payable. Then benefits are generally paid in arrears, so the first payment arrives after that period has been earned. Ask for both dates.
An individual disability policy is generally written for the off-the-job risk. In Texas the on-the-job path is workers’ compensation — where the employer has elected to carry it, which many Texas employers lawfully have not.
Benefits from a policy you paid for with after-tax dollars are generally excluded from your gross income. Benefits attributable to employer contributions that were not included in your income, or paid by the employer, generally are not excluded. We say "generally excluded" rather than "tax-free" because the statute has exceptions and your situation decides which applies.
Sometimes yes, often no, and the answer is in the four provisions rather than in the premium. Bring us the group certificate and whatever you are being offered and we will read both.
Moon Insurance Managers, Inc. — 360 FM 1959, Houston, TX 77034 — (281) 484-8320