Top 5 Factors to Consider When Getting a Disability Insurance Policy

Many employers offer group disability coverage, which is often inexpensive or even free. But that coverage is typically not portable if you change jobs. It may also exclude bonuses, commissions, and retirement plan contributions.

When purchasing individual disability insurance, you should look for a policy that offers a broad definition of disability. This means it should cover own-occupation and specialty-specific disabilities and any occupation.

Premiums

Many factors affect the premiums for disability insurance. A person’s age, occupation, and health, as well as their smoking habits and lifestyle choices, all influence the rates they’ll pay for the policy.

The policy’s waiting or elimination period also impacts the cost of premiums, as does the coverage duration. A more extended elimination period means higher premiums, while a shorter one means lower premiums. People in high-risk occupations, such as commercial truck driving or construction, will pay higher premiums for their disability coverage than office workers or physicians. The same is true for hobbies that pose more risk of injury, such as skydiving or rock climbing.

Coverage

The portion of your income that a disability policy will pay out if you become disabled. Many people have group disability policies as part of their employee benefits, or they can purchase an individual disability policy through a financial professional. Your advisor can help you determine how much coverage you need. A good policy should have an own-occupation definition of disability and be non-cancelable with guaranteed renewability. It is essential to have enough disability insurance to replace your income if you become disabled. It may seem unlikely that you could miss months or even years of work due to an injury or illness, but it does happen. Getting disability insurance New York when young and healthy can be a smart financial decision.

Definitions

Each disability insurance policy and carrier has a different definition of disabilities, which will impact your coverage. For example, some policies offer “own-occupation” benefits only if you can’t work in your chosen profession. In contrast, others have a modified occupation definition that pays when you can’t perform the duties of any occupation.

You also need to consider the waiting period, which is how long you must wait before your disability benefits start. This varies from two weeks for short-term disability to 90 days for long-term disability. Other policy features include riders that enhance your coverage, such as a cost-of-living adjustment rider, which adjusts your benefit amount annually. Another option is a future increase provision, which allows you to increase your benefits without further medical information or financial requirements as your income increases.

Riders

Disability insurance provides financial stability to help cover costs. Getting disability coverage early in life is often a smart financial planning strategy. However, your policy type will depend on your specific needs. For example, the elimination period, definition of disability, and disability benefits period are essential factors to consider.

Some policies offer riders that allow you to increase coverage without undergoing medical underwriting. This is called a benefit purchase rider or a benefit update rider. However, this feature is typically limited to a maximum of age 55.

Individual disability insurance can be purchased as an independent policy or through a group, such as a medical association or specialty society. Purchasing an association group policy can result in lower premiums, as they are typically stepped and start low and rise at specific intervals (typically every five years). You should consider the benefits of this option carefully.

Definition of disability

It’s essential to have disability insurance to avoid debt, foreclosure, and bankruptcy should you become disabled and unable to work. However, choosing the right policy can be tricky. It’s essential to know the five features of a disability policy to make the best decision.

The definition of disability is one of the most important factors to consider. Some policies define disability as being unable to perform the duties of your occupation, while others describe it more broadly as being able to perform any occupation. Policies with a narrower definition of disability are generally less expensive than those with a broader definition.

It’s also essential to choose a benefit period that’s appropriate for your situation. A policy that lasts until retirement offers the most protection but will be more expensive than one that only pays once your income reaches a specific amount.