Disability Insurance – What It Covers and When to Get It
Disability insurance is an income replacement insurance policy which is dispensed to you if you are injured or too ill to return to work. It’s the only insurance available which keeps all other assets protected. Without insuring your income, any investments and/or insurance you have been contributing to for possibly many years will no longer have a source of funding for their upkeep. There is potentially a risk you could lose not only your home, but your car, insurance plans and any ability to plan or fund your retirement.
From accumulating assets to long-term financial plans, you have worked hard as you have gone through life. Have you given any thought to how you are going to keep these assets as well as your long-term plans if your income source is no more? Any disability programs offered from the government don’t necessarily get awarded to everyone in the event of disability. With strict requirements, averages of one third of all cases are approved. With the ability to structure, your disability insurance covers either partial or total disabilities for either short or long term. It’s essential to make sure you have the right coverage just in case.
Prices for disability insurance can vary greatly. Unless you have the opportunity to get insured through an employer, it could get pricey. You can estimate 1 to 3 percent of your annual income. This cost will depend on several factors, including your choice of policy, your type of employment, your health condition, and your age. Whether or not you smoke is also a factor.
If you don’t need immediate payments of your disability insurance following a disability (due to reception of workers’ compensation or employee benefits), you could save quite a bit of money on your premium by choosing to wait for reception of your disability payments.
You can choose either a traditional fixed-premium policy, or one similar to term life insurance plans. These are called annually renewable disability income policies. This type provides you with affordable options, with premiums rising in price minimally each year. With either of these plans, you determine the monthly payment in order to receive appropriate insurance – typically an amount around 60 percent of your earnings. Following this, if you become disabled, those payments will be returned to you.
When considering the purchase of a disability policy or when reviewing a current one, the main objective is to adequately cover your monthly expenses. Some individuals choose to insure their entire income, even though it may be higher than their respective expenses. This ensures there is enough money being received to cover your assets.
A good policy will always take into consideration inflation and its impact on your monthly benefit on a long-term basis. Always verify the possibility of adding an inflation rider to your policy.
There comes a time to realize that not all disabilities are equal. The majority are partial disabilities which decrease the amount of time you are able to work, but allow you to work at least part time. A perfect example of this is Multiple Sclerosis, which is a disease of many faces. Always look for a residual disability rider to ensure a partial benefit will be paid if you are partially disabled.
One way some insurance companies save money on policies is through their definition of disability. If your policy reads “any occupation” this could result in you having to return to any position, even if it’s not your own. A policy stating your “own occupation” is something you need to look for when choosing an insurance plan.
There are a wide range of questions and verifications which need to be addressed before committing to any one particular disability insurance policy. If you plan for this potential need ahead of time, you can shop around for the policy which best fits your needs, as well as your pocketbook.