Disability Insurance Tip Center
Individual Disability Income Insurance Policy Tips
If you're depending on your income to cover the cost of your living expenses, it's essential that you protect your income with a quality disability income insurance policy. When comparing individual long term disability insurance options, make sure you're choosing the best policy for your needs.
Personal Disability Insurance: What to Look For
Own Occupation Disability Definition: Be sure to select a policy that covers you with an "own occupation" definition of disability.
- Non Cancelable: Select a policy that specifies that the insurance company cannot cancel your policy for any reason, as long as you are paying your premiums.
- Premiums: Verify that the insurance company can't change the premiums as shown in your policy or whether these are level premiums or a guaranteed schedule of increases.
- Residual Coverage: Choose a policy that continues to pay proportional benefits after you're able to return to work, until the great majority of your income is restored to pre-disability levels.
When shopping for personal disability insurance, one of the phrases you're likely to see is "guaranteed renewable." It's best to select a policy that has this feature and it's also important for you to understand exactly what this means. When a disability income insurance policy is guaranteed renewable, the company cannot make material changes in your policy or refuse to renew coverage for any reason, as long as you pay your premiums.
Coverage Can't Be Canceled
When you have a guaranteed renewable private disability insurance policy, the insurance company can't cancel the policy regardless of changes to your health or life circumstances, even if something happens that places you in a higher risk class. Additionally, the insurance company isn't allowed to add restrictions to your coverage or alter the policy's provisions.
Rates Can Increase
The fact that a particular policy is guaranteed renewable does not, however, ensure that your rates will not change. While the insurance company can't refuse to continue coverage for a guaranteed renewable policy or single you our for a rate increase, premium charges can go up over the life of the policy subject to approval to all similar policies by the state insurance commissioner. That's why it's also best to look for a policy that is non-cancelable as well as one that is guaranteed renewable.
When evaluating doctor disability insurance policies, it's important to look very closely at the company writing the policy and the exact terms of coverage. Before signing a disability insurance contract, physicians should make sure that the policy provides top quality income protection coverage that can help them prepare for a worst case scenario.
How to Choose Disability Insurance for Doctors
Verify that the policy uses the "own occupation" definition of disability rather than the "any occupation" definition.
- Search for a policy that clarifies "own occupation" as your particular medical specialty rather than as the general medical profession.
- Look at the insurance company's financial strength ratings to verify you're purchasing coverage from a company likely to be around and able to pay if you ever need to file a claim.
What's your biggest monthly payment obligation? If you're like most homeowners, your mortgage note is the single largest monthly expense you have. Have you considered what would happen to your ability to make your mortgage payments if you became disabled due to a sickness or injury? If a significant portion of your monthly income is needed to cover your home loan payment each month, it's a good idea for you to consider taking out a disability mortgage insurance policy.
The last thing you want to face following a disability is the threat of foreclosure. For far too many people, dealing with such a situation becomes a reality. It's a fact that nearly half of all home loan foreclosures result from a disability. The good news is that you can keep yourself from dealing with this terrible situation by protecting yourself and your family with disability mortgage insurance coverage.
When choosing private disability insurance coverage, it's important to make sure that you are getting sufficient protection to take care of all of your living expenses – including making mortgage payments. Many individual long term disability insurance policies provide income replacement of up to sixty percent of your pre-disability income. If the amount you'd receive in the event of a disability isn't sufficient to cover all your expenses – including your mortgage payment – it's a good idea to consider additional coverage.
Because disability income insurance provides benefits in the form of a percentage of your monthly income in the event you experience a disability, premium rates are typically tied to the amount of money you make. When shopping for private disability insurance, you can expect to pay between one and four percent of your annual salary for policy premiums. In most cases, rate variations are based on coverage, with the higher premium long term disability insurance options providing the best coverage.
It's important to look closely at the policy terms before selecting a policy, rather than making your choice solely based on price. Make sure you choose a coverage option that truly provides comprehensive income protection benefits rather than going for the cheapest option. If you find yourself needing to file a claim, you'll be very glad that you chose the best available individual disability insurance policy.
Before you make a final decision about your personal disability insurance coverage, you'll need to make several important decisions. You'll have to select several policy options, including the maximum benefit and the elimination period for benefits. Typically, the quality and extent of coverage is directly proportional to premium costs.
The lower the amount of income protection and the longer the waiting period for benefits, the lower the policy premiums will be. That's why you shouldn't choose long term disability insurance solely based on price. Make sure the policy you choose has favorable coverage options, providing you with the best possible protection for your income.
Maximum Benefit: Don't make the mistake of assuming that disability income insurance will provide replacement for 100 percent of your income if you lose the ability to work. Most individual short and long term disability insurance policies offer benefits that pay up to 50 or 60 percent of your pre-disability income. Make sure you understand the maximum benefits for any policy you are considering.
Elimination Period: No disability income insurance policy starts paying benefits as soon as you experience a disability. Elimination periods vary from as little as one month to as long as a year. Verify that you know exactly how long you'll have to wait to receive benefits following becoming disabled, and make sure you have enough money saved to take care of your living expenses during the elimination period.
When you're purchasing disability income insurance, you'll have an opportunity to select from among several different types of riders (a rider is a benefit added to a policy) offering additional protection. While making a determination of the exact riders you need is largely based on your personal financial and professional situation, there are several individual disability insurance riders that everyone can benefit from.
3 Best Beneficial Personal Disability Insurance Riders:
- Inflation Protection: It's a fact that inflation is likely to affect everyone as time goes by. When your individual long term disability insurance options include an inflation protection rider, your benefits will be adjusted in accordance with the cost of living up to a percentage per year that you select at the inception of the policy.
- Future Increase Protection: Over time your income will likely increase with your business or practice growth. If your individual long term disability insurance policy includes a future increase rider, you can add on additional coverage as your earnings increase without proof of medical insurability at that future time.
- Provision for Residual Disability: Not every disability results in a complete loss of income or ability to work. When you opt for a residual disability rider, you'll be able to receive a percentage of benefits in accordance with the impact a partial disability has on your income.
When choosing disability insurance, physicians need to look very closely at how partial disability is defined in the policy's terms and conditions. In many disabilities one comes back to work, so it's essential to understand how benefits are paid while the insured individual is recovering and begins to return to work. The best disability insurance for physicians provides coverage for loss of income when they can't work because of sickness or injury and also provides residual (partial) benefits after going back to work or while recovering and working part time.
Upon returning to work following a disability, it can take a significant length of time for a physician's practice to recover to the level it was before the disability. That's why residual benefits are so important for doctors. Physicians who are covered by loss of income residual disability insurance will receive benefits in proportion to the percentage of income lost after returning to work, for up to the complete term of the policy.
Looking for the best possible individual disability insurance premiums? The elimination period associated with any disability income insurance policy has a significant impact on premium costs. The elimination period refers to the period of time you'll have to wait between experiencing a qualifying disability and beginning to receive benefits. The longer the elimination period, the more time has to elapse before you'll be eligible for benefits.
The longer the elimination period, the lower policy premiums are likely to be. While lower premiums sound great when you're shopping for a policy, long elimination periods can result in significant financial hardships for policyholders who need to file a claim. Before you choose a policy with a long elimination period in order to get the lowest possible premiums, be sure that you understand exactly what it means to have an extended waiting period. Some policies have elimination periods of as long as a year, while others require a waiting period of only 30 days. Most policies fall somewhere between these two extremes.
Be sure you know how long your policy's waiting period is, and make sure you're prepared to meet your financial obligations for the period of time you'll have to wait to receive benefits. If you have a significant sum of money saved that you can use to cover living expenses, a policy with a long elimination period might be ideal for you. If you don't have access to cash to pay bills, you're likely better off going with a shorter elimination period when selecting personal disability insurance.