What Everybody Ought To Know About Disability Insurance

Photo by David Knudsen

Originally Posted On: What Everybody Ought To Know About Disability Insurance – How To Save A Fortune On Must Have Insurance Cover (insureqi.com)

When you’ve decided to finally get disability insurance, you are plagued with so many questions. What kind of disability insurance should you get? What does it cover? And what are the terms? For how long will you be covered?

Not knowing what you want and not digging deeper into your policy can cost you, should there be a need to use it when an unfortunate event occurs. The key to making the most of your disability insurance is to understand the terms and conditions, as well as many other factors.

When you’re about to choose your disability insurance, here are 10 things to consider:

Video Credit To :Marc Whitehead & Associates

There are advantages and disadvantages to getting your own disability insurance and purchasing one from work. For starters, an individual policy is based on your own terms. For a group benefits plan from your employer, it can be subject to the terms of the company. Most companies offer disability insurance under the federal ERISA law, which your employer partly pays for, or it is offered to you for free.

The disadvantage of choosing an individual policy is that it can be expensive; whereas a group benefits plan can be cheap, and as mentioned, can even be availed of for free. However, there’s a major difference in enforcement. In an individual policy, you have full rights over the enforcement of your policy should a breach occurs, while you are subjected to many restrictions if you purchase one from your employer.

There are so many definitions to the term “disability.” This means that you would have to really understand what the term means in your policy. Most disability insurance offers a 2-tier definition, with the initial definition being the policyholder not being able to continue your job for more than 90 days due to an accident or sudden illness. The second definition of the “disability” term in your policy could then shift after 24 months into the policyholder not being able to work in “any occupation” due to the disability.

The best policy to choose should be a policy wherein the use of the term disability is considered “any occupation” exclusively.

If you purchased the policy from your current employer, can you carry it over to your next employment? If not, then you might reconsider purchasing disability insurance from your current employer. It would be futile to pay for insurance from your very own pocket but you won’t be able to carry it over to your next employer, should you leave your current company.

The best policy is one where your insurance is renewable and non-cancelable. Why? Because if you’ve continued to pay for many years and missed only a couple or three premium payments, and there is no renewability term to your policy, then all of those years of payments will be a waste.

A non-cancelable policy also makes sure that your premium and your coverage will not change.

Your disability insurance should have a guarantee for renewability, even if your age or your certain situation may put you at a higher risk for disability. This means that your insurer cannot cancel your policy just because you developed an illness five years after you purchased your policy, which may put you at a higher risk for disability. They can, however, increase your premium in such cases, if they deem it is needed.

Insurance companies can change certain terms of your policy anytime. You must choose a policy wherein you understand when and how changes are made by your insurance company so you are aware of your benefits even after 10 years from the very first day you signed your insurance documents.

In case the unimaginable happens, when will you start receiving your premium? The collection time period is usually around 30 to 90 days after you filed for disability. Some insurance companies, however, can release your premium up to 700 days after you filed. Make sure you know the collection time period of your policy so you know exactly when those checks will come in case something happens.

While cost-of-living is not usually covered in most disability insurance policies, you can ask your agent if any of their products can offer this benefit. It can help you cover certain financial expenses that are not part of your main monthly benefits.

If you are able to perform another job but with a lower salary than what you had before your disability, the residual benefit will cover the difference of your previous income. This will greatly help you to continue your lifestyle and quality of life before you had the accident or illness.

So you purchased your insurance today. After 6 months, you were promoted to a higher position, and therefore, you enjoy a higher income. You stayed in this position for 10 years and enjoy a certain amount of income per month. And then an unfortunate accident occurs that prevents you from continuing your duties and responsibilities, and thereby deeming you unemployable.

Now, since you applied for your insurance when your income was lower than what you’ve enjoyed for the past 10 years, what will be your coverage? Is it the lower-income or the higher income? If you don’t ask your agent to include future increases in your monthly benefit, then you will only be covered for the income that you enjoyed when you applied for your policy initially.

If you believe that your income will increase in the near future, a future increase clause should be included in your policy.

While the terms of any kind of insurance is something that you don’t really enjoy understanding deeper or even talking about, you really need to consider a number of things so you can enjoy the most of the benefits should you need the insurance one day. It can mean the difference between a good quality of life, or one where you are filled with regret.