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How to Insure Your Income: Association Disability Plans

Professional associations -- such as the American Medical Association or the American Bar Association -- offer association disability income coverage to their members. Often, this coverage is provided as an inducement to attract membership.

Association disability plans function very much like group plans. However, there are some differences.

Technically, association coverage is individual coverage. As a member of a professional association, the person will complete an application for insurance, and an individual policy will be issued through the association.

Association plans are packaged plans, in that only certain elimination periods, benefit periods and benefit amounts are offered to members.

Premiums for association coverage usually are banded. That means they are grouped based on increments of age. For example, everyone between the ages of 25 and 30 pays the same premium; other bands of five (or 10) years continue to age 55 or 60.

Typically, the amounts of coverage also are predetermined -- such as a $1,000 benefit or a $2,000 plan. This packaging of the product is facilitated by the fact that all members have the same occupational classification and job duties -- i.e., physicians, lawyers, etc.

Association plans may offer a minimum guaranteed issue policy without regard to the insurability of the member. This, of course, is an advantage for the uninsurable individual. Through the association, he or she can acquire disability income insurance regardless of health history.

Disadvantages of association coverage include the fact that the policy may be cancelled by the insurer or the association. In essence, the association members are renting the coverage, much like the participant in an employer group plan. In addition, the individual can lose the coverage if he or she no longer maintains membership in the association.

A final disadvantage is the fact that the premiums are not guaranteed. The insurer can raise the premium for the entire plan. Also, the member will pay higher premiums whenever he or she moves into a new age band.

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