Debilitating injuries and chronic illnesses can come out of nowhere and take you out of the workforce in an instant, regardless of your age or profession. That’s why disability insurance is important for everyone. It protects your ability to earn an income if tragedy does strike and provides you with invaluable peace of mind, even if it doesn’t. That doesn’t mean all policies are alike. If you don’t know what to look for, you can end up overpaying for policy features that you might not need. Here are a few tips to save on own-occupation disability insurance.
Opt for a Longer Elimination Period
Every disability policy includes a waiting period between the time of your disability claim and the dispersal of your benefits. This is known as the ‘elimination period’ and it typically lasts anywhere from 30 days to one year. The shorter the elimination period, the more expensive your plan is likely to be, which is why most people tend to go for a 90-day elimination period. But if you really want to save, you can look into extending that to 180 or 365 days.
However, it’s important to remember that if you do opt for a much longer waiting period, you will have to provide for yourself during this time as you won’t have any benefits coming in. Therefore, this option is best reserved for those with a good amount of money in savings.
Reduce Your Benefit Period
Your benefit period is the length of time that your policy will continue issuing benefits after your disability. Because you never know how long a disability or illness can last, a lot of people opt to extend their benefit period all the way to retirement age (65-70 years old depending on the insurance provider). This is nice because it keeps you protected in the event of life-long debilitation. But it’s also the most expensive option.
However, if you’re looking for ways to significantly reduce your monthly premium payments, you might consider shortening your benefit period. Bringing your benefit period down to 10, 5, or even 2 years can save you up to 30 percent on your plan. The drawback here is you aren’t protected from the worst case scenario. So if you want that peace of mind throughout your entire career, you might just want to stick to that retirement age benefit period.
Eliminate Unneeded Riders
Every insurance provider offers riders that you can add to your policy to make it more robust. But you can save a considerable amount on insurance if you opt for a strong base policy with a minimal amount of extra riders.
A good example of a rider you might want to avoid is the ‘return of premium.’ This is basically an agreement between you and your insurer that says if you don’t file a disability claim within a certain period of time, usually 5-10 years, you are entitled to a refund of a certain portion of your premiums. This rider can actually double the cost of your policy, making it not all that worth it in most cases. But that doesn’t mean all riders are bad. Be sure to do your research and go over your options when it comes to riders. You don’t want to go too bare-bones with your policy and end up under-insured.
Reduce Your Monthly Benefit
Although disability insurance is designed to replace your income in the event of injury, it won’t replace all of it. The average plan aims to cover you for up to 50-70 percent of your salary. However, if you think you can make do with less (maybe you have some extra help, or have ways to cut down on expenses), opting for a lower monthly benefit can greatly reduce your premiums. It might help to go over your expenses before buying your policy to see where you might be able to cut down on waste and excessive spending.
Regardless of how you choose to go about reducing your insurance costs, the most important thing you can do is research. Talk to your insurance provider, shop around and be as informed as possible. Insurance contracts can be complex, so the more you know going into the process, the better off you—and your wallet—will be.