Before you buy disability insurance - be sure to ask these eight questions:
1. How does the policy determine if I’m disabled? The best plans define disability as a sickness or injury that prevents you from performing the duties of your own occupation or medical/dental specialty. This definition should apply for the duration of the claim, not just for one or two years.
2. If disabled, can I earn an income in a different occupation? The most comprehensive policies allow you to earn an unlimited income in a different occupation while on claim; others put a limit on how much you can earn.
3. When do disability benefits begin? The length of time that must elapse from the date of disability until benefits are paid is called the elimination period. Options are 60, 90, 180, and 365 days. The most common with long term disability insurance is 90 days.
4. How long do benefits last? The maximum length of time benefits will be paid is called the benefit period. Depending on the insurance company, options are 5 years, 10 years, to age 65, 67, or 70 and to age 65 with lifetime extension. The most common benefit period is to age 65.
5. Are partial disabilities covered? The residual benefit pays a partial monthly benefit in the event of a partial disability. The percentage of monthly benefit paid is typically equal to the percentage of lost income. Cheaper policies require a period of total disability before a partial benefit is paid – this is VERY problematic for disabilities caused by things like progressive illness.
6. Will the benefit keep pace with inflation? An optional rider that increases the monthly benefit during each year of disability to keep pace with inflation is called the Cost of Living Addition (COLA). Depending on the policy, the increase is either a fixed amount or based on the consumer price index. This is an important policy feature in long term disability insurance because during an extended claim, inflation could double the amount of income needed for living expenses.
7. Is there a guarantee I can buy more coverage? An optional rider that allows you to increase your monthly disability benefit at some point in the future, regardless of health status, is called the Future Insurability Option (FIO). This is a valuable benefit if you expect your income to increase in the future.
8. Can the insurance company change or cancel my policy? A guaranteed renewable and non-cancelable policy can’t be changed or canceled by the insurance company as long as premiums are paid. In addition, premiums cannot be increased.
No one plans on becoming disabled – get your coverage in place and enjoy the peace of mind that comes with enhanced financial security.