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Individual Disability Insurance – Personal Disability Insurance Coverage

Choosing an Individual Disability Insurance Policy

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.
  • Noncancellable: 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 and whether they 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.

Understanding What Guaranteed Renewable Means

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.

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.

Guaranteed Renewable and Non-Cancellable Disability Coverage

Coverage Can’t Be Canceled and Rates Will Never Increase

When you have a guaranteed renewable and non-canclellable individual 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. And finally, the insurance company can never raise your premiums.

Determining the Optimal Elimination Period

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.

Three  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 specified 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.

Disability Income Insurance Cost

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 earn. When shopping for individual 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.

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