When you think of purchasing a disability insurance policy, do you question if it’s too expensive? Can you really afford it? After all, those monthly payments could go towards a new car, new clothes, or a vacation, something that gives you immediate gratification. But consider the opposite: Can you afford not to have disability insurance?How expensive would it be if something happened and you didn’t have a policy?
The nice thing about disability insurance is you don’t need an “all or nothing” policy. So if you’ve looked at disability insurance before, and got a case of sticker shock, remember that the little bit of protection that you can afford is better than nothing at all.
Here are a few rules of thumb to think about when you’re considering buying a disability policy.
1. Start with an amount you can easily afford.
The correct amount of insurance to own is almost never a specific dollar amount, beyond providing for your most basic needs. The answer is usually “just as much coverage as you can easily afford.” You can use a graded premium option to get coverage now at a lower cost. At a later point, when you’re making a better income, you can switch to a level premium to freeze the rate. Additionally, coverage can be added as you go—provided you still medically qualify, or you’ve selected the Future Insurability Option, which doesn’t require a medical test.
2. Most plans cost between 1 percent and 4 percent of your annual income.
The sooner you act, though, the lower your premiums are likely to be. It’s the people who wait who wind up having to pay the higher amounts. And some of them can’t buy insurance at any price because they have pre-existing health issues that make them uninsurable.
After all, you can’t buy fire insurance when your house is already burning down.
It’s not starting early that makes disability expensive. It’s waiting.
3. You may qualify for discounts.
Many residency programs, for example, negotiate disability insurance premium discounts on their residents’ behalf that can save as much as 10-40 percent on premiums – for as long as you keep the policy in force.
4. Going uncovered is a gamble most can’t afford to lose.
Considering that half of all home foreclosures in 2006 were due to medical problems, and medical problems contributed to 62% of all personal bankruptcies files in the US in 2007, this is one gamble you don’t want to take.
5. No one who filed a claim and received their benefits has ever felt disability insurance was too expensive.
6. If you think paying a premium is difficult, imagine how devastating losing your whole paycheck would be?
When you think about it, perhaps not having disability insurance is too expensive.