Do You Need Disability Insurance?
Disability insurance is an added protection for you and your family should you suffer an illness or an injury which forces you out of work and out of a paycheck. To begin making the decision about whether or not to carry disability insurance, add up all the benefits for which you would qualify from your employer, the government and a monthly withdrawal from your savings. If you believe you could live on this amount, especially if it approaches your current monthly income, you may not need disability insurance.
If you feel a need for the added security of disability insurance, you should look at many different factors to find the disability insurance policy that fits your needs. Here are just a few of the points to consider in a disability insurance policy:
Many disability insurance policies define “disabled” differently. Some disability insurance companies may only cover disabilities occurring as a result of accidents; others will cover illnesses as well. Ask if the disability insurance policy will begin to pay when you cannot work at your own job as a result of your disability or if it will only pay benefits when you cannot get any job.
Some disability insurance companies will require you to be completely disabled while others will only require partial disability. Also, sometimes you may be able to receive benefits even if you are able to work because you have lost your eyesight, hearing or speech.
When you compare disability insurance policies, look at when they will start paying benefits. You can usually be in charge of when you can begin receiving your disability insurance benefit payments. Some people may choose to have a waiting period between the time of a disability claim and the first benefit payment, ranging from 30 days up to even a year after the claim. The longer the waiting period you choose, the lower your disability insurance premium, but remember, you will be without an income during this time, so the income amount you figured above will have to suffice until payments begin.
With most disability insurance policies, you control the length of time you will receive benefits. Short-term and long-term disability insurance policies give you the option to choose whether you will receive coverage for a temporary disability or a more long term disability. You can choose coverage that pays out over a period of months, a few years, to age 65 or through your lifetime.
Ask how much of your income will be covered by the disability insurance. Most policies will cover a percentage of your income, depending on your current income and your income from other sources.
Find out if the disability insurance policy has the option for cost-of-living adjustments that will increase your benefits according to inflation over the years.
Some policies will begin to waive your premium payment after you have been disabled for a certain length of time. When you have had a reduced income for a long period of time as a result of a disability, not having to pay a premium will help your finances significantly.
Finally, look at the types of renewable disability insurance policies. Non-cancelable will continue with the same benefits, guaranteed renewable are automatically renewed with the same benefits but could have higher premiums, and optionally renewable policies can be renewed if the company decides to renew it.
D. Blair Thompson