What to Know About Buying Disability Insurance

Many types of people would like to buy disability insurance because, while they have health insurance to pay for medical services, they have no way to replace lost income if they cannot work. In fact, a large portion of bankruptcies are caused because of an illness or injury, and the majority of these people had health insurance.

While most of us can barely surf the web or watch television without seeing an advertisement for life insurance, private disability insurance has not been marketed the same way. Applications are usually more complex and scrutinized more closely. Insurers are concerned that there will be a much higher chance that a person will make a disability claim than actually die during the term of common life insurance policies.

However, some insurers specialize in selling disability insurance to small businesses and individuals. In addition, many popular term life insurance policies have the option to attach a disability rider. The amount of disability insurance allowed is usually a percentage of the insurance policy’s face value or the applicant’s yearly income.

Short Term Disability

This usually has a short waiting period before insurance kicks in, but will cover for a maximum of 2 years. A short term policy may have an initial waiting period of a few days to a few months. Of course, the longer the waiting period, and the shorter the maximum coverage length, the less money the premium will cost.

You need to balance the premium vs. the amount of time you can afford to be without income. I believe people should buy insurance to protect themselves against financial catastrophe, and not for minor setbacks. A person would be better off saving the money to replace their income for a few weeks to a few months, and then purchasing a short term disability policy with a longer waiting period.

A person may purchase a short term disability policy to protect themselves against losing income in case of many circumstances like a broken limb, pregnancy (check the policy), or severe illness.

Long Term Disability

This product, as the name implies, covers an individual for a more serious disability that will take years to recover from. Policies usually require a longer waiting period, and they cost more since an insurer takes a larger risk.

Common Maximum Coverage Terms of Long Term Disability Insurance:

• 5 Years
• Until Retirement Age
• Lifetime

Types of Disability Coverage

• Own Occupation – These policies will pay out if the covered person cannot perform their own occupation. These policies provide the best coverage, but also cost the most.
• Non Own Occupation – In this case, a covered person would be expected to take another job they may qualify for, even if they have to take a lower salary. For example, consider a surgeon who cannot perform his or her job because of a hand injury. He or she might still be able to teach at a medical school or work in another medical practice that does not require a dexterous hand. In that case, a non-own occupation policy would not pay the claim.
• Hybrids – These disability insurance policies may make up some of the difference between a skilled worker’s salary if he or she is relegated to a lower paying job.

How to Find Disability Insurance

Most qualified life and health insurance agents can help you find disability insurance. You may also be interested in purchasing life insurance, with a disability rider, in order to combine payments and the underwriting process.

– Posted in:

Life Insurance

– Tags:

– Bookmark:

Digg del.icio.us Reddit StumbleUpon