When choosing a disability insurance policy to cover you in case of injury or illness, there are several factors to consider.
Since many disability policies offset or deduct from potential Social Security disability benefits, choosing disability insurance may present more challenges.
Here are 10 things to consider when choosing a disability insurance policy:
Individual disability policy vs. employer-sponsored group Policy
If you are thinking about buying disability insurance, you might be able to get coverage through your employer.
However, most of these group plans limit your enforcement of coverage, should you ever become disabled, under federal law.
When purchasing individual disability coverage, premiums are based on several factors, such as age, health, and occupation. Individually purchased policies are more expensive, but they offer more coverage.
The definition of disability
You should review your insurance provider’s definition of disability as there are many ways to define disability. Most companies utilize a two-tiered definition for disability.
A worker is initially deemed disabled if he or she is unable to perform the duties of their “own occupation.” This is the job they held before becoming disabled.
After a defined period of time, usually 24 months, the standard of disability will change. Typically, this is defined as a worker’s inability to perform “any occupation.” In other words, the worker must show that they are unable to do any job.
Some policies stipulate that the employee must still be able to earn a percentage of their previous salary under the “any occupation” standard.
This percentage is usually between 60 and 80 percent.
Portability
If you purchase your disability insurance through your employer, ask if you can keep that insurance if you leave the company. If your insurance is non-portable, it will not follow you if you happen to leave your job for another.
Having a portable insurance policy gives you peace of mind that you will be covered no matter where you work.
Although not many disability policies purchased through an employer are portable, it is something you should look into.
Your premium
Premiums also vary depending on the insurance provider. Some policies allow you to lock in a premium, while others do not. Also, you can get a non-cancelable policy or a guaranteed renewal policy.
These options greatly differ, so be sure to choose the one that suits your situation best. A guaranteed renewal allows you to renew without making any changes to your coverage, but your premium can fluctuate.
A non-cancelable policy means your coverage and your premiums cannot be changed, assuming you are paying your premiums on time. Also, be sure to find out if premiums are waived during a qualified disability.
Cost of living benefits
Cost of living benefits is not included in most policies. Adding this rider is something you will want to consider when making your choice regarding disability insurance.
Cost of living benefits is meant to provide financial stability by offering an increasing benefit.
Residual benefits
Another thing to be sure your disability insurance policy includes is residual benefits.
Residual benefits will help you make up your income if you can only work partly. Residual benefits will help you to make up the rest of your income, making these benefits extremely important.
Collection time
It is also very important to note the collection time period, as this could affect which insurance company you choose.
With some policies, you can start collecting as soon as 30 days after your disability claim has been filed.
Coverage changes
Many policies can be changed by the insurance company at any time throughout your coverage.
This allows insurers to raise your coverage rates whenever they want, whether your policy is up for renewal or not.9. Future Increase
The future increase option rider is an addition to your disability coverage. However, it is worth considering if you think your income may increase over time.
With this additional rider, you can increase the monthly benefit of your policy, disregarding the status of your health. Without this rider, your policy will not protect your future income whatsoever.
Renewabilty provision
If you’re wondering if your disability insurance is renewable, you should check the renewal provision.
If your situation changes, the insurance company can’t cancel your policy.
But even with a guaranteed renewable policy, the insurance company can change your premium.
A non-cancelable policy offers a guaranteed future premium. The best disability insurance policies will be non-cancelable and guaranteed renewable.
