7 Things To Look For In A Disability Insurance Policy
There are over 8 million American adults who are partially or totally disabled leading them to abscond work. A further 375, 000 citizens are prone to total disability every year--deciding to buy a disability cover is a superb step. Hence it should be a top priority for all the parents.
Given that the number of non-government employees without disability insurance has hit over 68%. This is even more disturbing because the Social Security Administration further reports that there is 1 out of four probability that people in their 20s will be 90 days disabled before hitting retirement age.
We’re going to check out what’s disability insurance? What does it cover? What to look for before settling on a disability insurance policy?
What Is Disability Insurance?
Disability insurance is aimed at covering you in case of an injury or illness that may render you incapable of performing duties that necessitate your income. Though there are several definitions of disability in respect to the policy you buy, normally ailments like cancer, heart attack, or physical injuries are covered.
What You Should Look For In A Disability Insurance Policy?
One very key thing to note is that there are a variety of policies with policy provisions known as riders which can be amended and factored in the disability insurance. They have two distinct protection features that you can pick depending on your preference; Non-Cancelable and Guaranteed Renewable.
The policy benefits vary significantly offering the client an array of options to pick from;
Partial or Residual disability rider- You’ll be able to exercise the opportunity to get back to work and receive partial disability payments.
Benefits Coordination - This option offers you the chance to specify the target amount you’ll receive from all your policies combined.
Premium Refunds - If there are no claims made after a specific time you’ll be able to get a refund of your premiums.
Adjusted to cost of living - Though it may cost a bit higher-- just as the policy suggests you’ll receive increased benefits proportional to the cost of living.
Premium Waivers - This allows you to forfeit insurance payments in case of a 90 day disability period.
Additional purchases - For this option, you have the leeway to buy additional insurance later on.
7 Factors To Consider Before Purchasing Disability Insurance
The benefits above should guide you in picking a suitable policy, and you should pay close attention to the following factors.
1. The Elimination Period
The waiting period between short-term and long-term cover varies from 3--90 days for short and 90-365 days for long-term.
2. Duration
The recommended policy is long-term disability insurance with a coverage of 5 years--this period can cater to the majority of people. But a person can as well buy a policy covering between 2, 5, 10 years or up to 65 years.
Though other policies can cover for a lifetime, it’s advisable to stop paying the premium after retirement and rely on Social Security Disability. Short-term insurance covers are expensive and cover between three, six months, and up to a year.
3. Individual or Employer Group
Though individual disability insurance covers offer more benefits, the premium cost is high. With an individual cover, you can have later purchase options, adjustments to cost of living, etc. On the other hand, with group insurance, the benefits are combined with Social Security Disability Insurance.
4. Coverage Terms Changes
Equipping yourself with the necessary knowledge of when and how changes may arise on your insurance policy is critical because insurance companies may decide to change the policies over time. The changes include the increment of premiums whether you’re up for renewal or not.
5. Provision to Renew
If there are any situational changes your insurer may be inclined to alter your premium--checking the renewability provision cap will put your mind at ease. It’s therefore also important to choose a non-cancelable and guaranteed renewable policy as you’ll have a guaranteed future premium, and the premium won’t change without your consent.
6. Income Percentage Cover
The cost of getting disability insurance is often determined by your income. Experts always advocate for policies that cover between 60-70% of your income after tax. A cover higher than 70% will translate to high premium costs.
7. Are You Risk Prone
Though it may be hard to determine if and when you may encounter a situation that may render you disabled, it would be futile to have a cover of your not prone to any risk of injury in relation to your occupation. So, it would be prudent to assess your situation before buying a disability insurance cover.
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