Comparing Long Term Disability Insurance Policies

When you’re looking at disability insurance comparisons from different sources, make sure to pay close attention to the specific terms of the policies you are considering. While there are many similarities among long term disability policies, there are a number of important differences that can have an impact on rates. Don’t choose long term disability coverage solely on the basis of price. Instead, make sure you understand exactly how the policies differ before making your decision.

What to Look for in Disability Insurance Comparisons of Benefits:

  • Locked Premiums: When you choose a policy with locked in premiums (these are guaranteed renewable/non-cancellable policies), your insurance company can’t raise your rates.
  • Non-Cancellable: Before taking out a long term disability policy, verify that it includes a clause that prevents the insurance company from cancelling your coverage as long as you continue to pay your premiums.
  • Guaranteed Renewability: Choose a policy that is guaranteed renewable, so you won’t have to worry about becoming ineligible for coverage if your health situation or occupation changes.
  • Length of Benefits: Make sure you understand how long benefits will be paid under the terms of the policy. Benefits typically can be paid for 2 years, 5 years, to age 65 or for life.  This is a choice you make at the inception of the policy.  It is recommended that you take a policy with benefits of at least to age 65.

Identifying the Best Disability Insurance Policy

When looking for a good long term disability insurance policy, it’s important to make sure that you know how to separate the best coverage from policies that aren’t as beneficial to you. Instead of immediately choosing the lowest disability insurance premium, make sure you understand how the policy you are considering stacks up against other options:

Definition of Disability: How is disability defined under the terms of the policy? It’s much more likely that you’ll experience a partial or temporary disability than one that is total and permanent. Be sure that you understand the circumstances under which benefits will be paid.

Residual Disability: The best disability insurance policies include residual disability coverage, which pays benefits based on the percentage of income loss you experience as a result of a disability, both during the time you are unable to work as well as after you are able to return to the job.

Integration of Benefits: Look for a policy with benefits that aren’t impacted by benefits you may be eligible to receive under the social security disability insurance program. Many times, the lowest disability insurance policies specify that benefits are reduced in proportion to social security benefits when and if such become available to the insured.

Understanding Own Occupation Disability

The manner in which disability is defined is one of the most important components in any long term disability insurance policy. If you want to make sure that you are fully protected, it’s important to look for a disability insurance policy that specifies the definition of disability in terms of your “own occupation.”

Many times, the lowest disability insurance premiums are for policies that do not define disability in this manner. Rather, they specify that benefits will be paid in the event you become unable to work in “any gainful occupation.” With this type of policy, you’d have to experience a disability so debilitating that you’d be rendered unable to hold any type of job at all. These types of policies are less expensive than ones that provide “own occupation” coverage because the “own occupation” policies are more likely to pay the claim in more circumstances.

If you’ve spent years training to pursue a particular occupation, there’s a good chance that you aren’t likely to experience the same level of personal and financial success if you find yourself having to change fields due to a disability. The best way to protect yourself, and your family, is with quality long term disability coverage that provides benefits if you lose the ability to work in your chosen occupation.

Understanding Residual Disability Insurance Differences

It’s important to understand that not all long term disability insurance policies define residual disability in the same manner. While it’s important to verify that any policy you are considering purchasing includes residual benefits, it’s also vital to look at how residual benefits are determined:

 Time and Duties Definition: When residual disability benefits are defined in terms of time and duties, benefits are paid out only until a certain period of time after you are able to return to work on a full time basis. Once you’re back on the job, performing essentially the same duties as you were prior to your sickness or injury, disability benefits will cease.

 Income Definition: With a long term disability insurance policy that uses an income definition of residual benefits, you will continue to receive benefits until your income returns to approximately 85% of the level it was prior to your illness or injury (may vary with each insurance company). Depending on your occupation, particularly if you are self-employed or if your compensation is based on performance or personal service such as a physician, dentist or attorney, it’s entirely possible that your income could suffer the financial effects of a disability for years after you are able to return to work full time.