Most adults realize that they need to protect the things that are important to them. You have car insurance to protect your vehicle. You have homeowner’s insurance to protect your house. You even have life insurance to protect the people you love. What you may not realize is that you and your ability to earn income are the most important things.
Anything you may want to do in life, own a home, send your kids to school, travel, give to others, or retire depends on your ability to earn a paycheck.
Just imagine what would happen if you lost the ability to earn an income for a few months, a few years, or the rest of your life. How would this affect your family, life, and future?
A disability insurance policy gives you a way to ensure that you and your family will be protected if you lose your ability to work because of an illness or injury.
Disability insurance protects your biggest asset: your income.
Imagine how much money you will make over a lifetime. A 30-year old who makes $60,000 a year would lose more than $4 million in lifetime earnings if he became permanently disabled. If you protect your other assets your car, house, and life why wouldn’t you protect your future earnings?
In today’s society, nearly three-quarters of Americans are living paycheck-to-paycheck. For most people, even a temporary disability that takes them out of work for as little as a month would cause financial strain. Only disability insurance gives you the protection from a temporary or permanent disabling illness or injury.
You may think that a serious illness or injury won’t happen to you, but disabilities happen far more often than you would think. This year, one out of every eight people will experience a disabling injury or illness, and the majority of these conditions are caused by illness, not accidents. Currently, disability is the number one cause of personal bankruptcy.
A disability insurance policy provides a percentage of your salary to you or your family upon a disability. Like many insurance policies, disability policies are easily customized; you can choose
ï The percentage of your income that the policy provides upon disability
ï How long the policy will continue paying you
ï The length of the waiting period before benefits begin
Wise consumers should understand these terms before searching for an insurance policy with disability protection:
Definition of and Extent of Disability:
Each policy will have its own definition of a disability. Depending on your policy, a disability may be considered a condition that prevents you from performing your current job or a condition that prohibits you from working any job. The extent of disability is also important; some policies only pay upon a complete disability, while others may cover a partial disability. Some policies also provide for presumptive disability, which means that you can be considered fully disabled if you have a special condition, such as complete hearing loss, blindness, or loss of limbs, even if you are able to work.
Renewal and Cancellation:
Typically, disability policies follow into one of these two categories:
ï Non-cancelable: as long as premiums are paid, the company cannot cancel the policy or raise premiums
ï Guaranteed renewable: as long as premiums are paid, the policy cannot be canceled, but rates can be raised for overall groups of policyholders
Benefit Period and Level:
Each policy offers a different length of benefit period; some may provide benefits for a couple of years, until retirement age, or until death. A disability policy will provide a certain percentage of your current income should you become disabled; that percentage can range from 25 percent to 75 percent, depending on the policy you choose. Policies that provide a high percentage and have a long benefit period are likely to have the highest premiums.
Optional Policy Add-ons:
Some of these benefits may be included in disability insurance quotes, depending on the companies, while other benefits may be added on:
ï Inflation protection provides a cost-of-living increase to your benefit for each year to account for inflation
ï Compassionate disability benefit provides a benefit if you lose income while taking care of a family member with a serious condition or disability
ï Future insurability options gives you the opportunity to increase coverage at any time, and the company is unable to decline coverage based on health factors
ï Catastrophic benefit rider provides an additional amount of money on top of the benefits to an individual who experience significant loss of the ability to perform daily activities.
Waiting Period or Elimination Period:
A waiting period is the length of time after the injury or onset of illness before the company will pay benefits. Many plans offer waiting periods of 30, 60, 90 days or six months. Disability insurance quotes with longer waiting periods are likely to be less expensive.
Partial Benefits:
A disability insurance policy that includes partial benefits, or residual benefits, provides coverage if you lose the ability to perform part of your job. For example, if you lost the ability to perform 75 percent of your current job, the policy would provide a 75 percent benefit.
Portability:
Policies purchased independently or on a voluntary basis through an employer are likely to be portable. A portable policy will follow you if you leave your current job. In contrast, a disability policy that is fully or partially paid by your employer is unlikely to be portable.
Recovery Benefit:
A recovery benefit provides a partial benefit if, after you return to work, you still experience a loss of earnings. Occupations in which this is more likely to happen include sales and private practice.
Recurrent Benefit:
Recurrent benefits protect you in case you have a relapse after you have returned to work. A policy that includes a recurrent benefit will not impose its waiting period for individuals who are unable to work because of a relapse of an originally covered condition.
Survivor Benefit:
The survivor benefit come into effect if an individual passes away while on total disability; at that time, the policy would continue to pay to the policyholderís beneficiaries.
