Single? Don’t Skimp on Disability Insurance

You are throwing away money when buying the cheapest policy on the
market. The odds of getting paid a monthly benefit under that
contract may be extremely lower than receiving benefits from a
quality contract. Individual disability insurance is designed to
replace anywhere from 45-60% of your gross income. This is designed
on a tax-free basis should a sickness or illness prevent you from
earning an income in your current occupation. Every disability
insurance plan has a different definition of total disability in
the policy. There are three basic types:

Own-Occupation Disability Insurance

If are deemed incapable to perform the duties of your regular
occupation, the company will pay the claim. You are even allowed to
get another job in a different field and still be paid. This is the
only plan that does not penalize somebody for going back to work in
a different occupation while on a claim.

Income Replacement Insurance

This is the most common definition of total disability in the last
few years. Most insurance carrier has moved to an income
replacement definition, if they stopped offering own-occupation
disability insurance. You will be penalized or lose the benefit if
you work while on a claim.

Gainful Occupation Coverage

This is a very common definition in an employer sponsored long-term
disability policy. This is also very popular with property and
casualty insurance companies who have decided to release a
disability insurance policy to offer more options to their clients
and put a foot in the market. This is the worst possible definition
and leaves whether you are disabled or not up to the insurance
company itself.

The first aspect of any disability insurance policy one needs to
understand is the renew ability feature. Non-Cancelable and
Guaranteed Renewable guarantees you that after you purchased the
policy there will be no changes to your premium schedule, monthly
benefits, or policy benefits to age 65 or whatever age you elected.
The insurance company legally cannot change anything concerning
your policy unless you want them to. A Guaranteed Renewable plan
states that an insurance company will probably not change anything
about the policy, but they can if they choose to at anytime. A
Conditionally Renewable plan is a policy that offers you virtually
no guarantees for your disability insurance policy. Stay away from
these policies; you will get burned. Next you will need to know
what you can expect if you get disabled.

There will be a period of time from the on set of your disability
till you receive a benefit check. This is called the elimination
period. The industry has made the most common offer a 90-day
elimination period for an individual disability insurance policy.
You can expect a high charge if you choose to go with a shorter
elimination period of 30, or 60 days. Most companies will also give
you a price break if you can go longer than 90 days. Now once the
checks star coming you have moved into your benefit period.
Choosing this is most important. You don’t want to be left with out
money to live on if you are disabled forever and picked a five-year
policy. This is time frame you will be getting a check, think
long-term, if you don’t need it than who cares, you might sometime
later. Once the elimination period has been satisfied, monthly
benefit checks will begin to come in at the end of each month. Your
benefits will stop when you return to work in your occupation, or
another occupation making the same income. The most popular choice
for a disability insurance policy is to age 65. Some people prefer
to go with lifetime with a higher premium.

A Cost of Living Adjustment is a rider that kicks in if you
actually go on a disability insurance claim, it will increase your
monthly benefit every year while you are on a claim along with the
CPI up to the maximum you elected. You have to be disabled for more
than a year to use it. A Future Increase Option is a rider locks in
your insurability for a certain period of time (normally to age
55). So, as you increase in age, and increase your income level,
you can increase your monthly benefit regardless of any health
changes. An Automatic Increase Rider increases your total monthly
benefit each year for about five years. Your premium will go up
with this rider each year because you are buying more disability
insurance coverage. Make sure you look at these carefully and pick
one that is best for you if you want the extra coverage.

DISCLAIMER: This information is for educational and informational
purposes only. The content is not intended to be a substitute for
professional advice. Always seek the advice of a licensed Insurance
Agent or Broker with any questions you may have regarding any
Insurance Matter.

Single? Don’t Skimp on Disability Insurance