Buying disability insurance
Buying disability insurance
Talk to the agent who sells you your life, health, auto or business insurance—he or she may either sell disability coverage or will be able to refer you to an agent who does.
Your state’s insurance department will also have names of agents and companies writing policies in your state.
Make sure that you understand what you are buying and don’t be afraid to ask your agent to explain exactly what is in the policy.
Key things to look for when you shop around
- The definition of disability. Some policies pay benefits if you are unable to perform the customary duties of your own occupation. Others pay only if you are unable to perform any job suitable for your education and experience. Some policies define disability in terms of your own occupation for an initial period of two or three years and then continue to pay benefits only if you are unable to perform any occupation. “Own occupation” policies are more desirable, but more expensive.
- Benefit period. The benefit period is the amount of time you will receive monthly benefits during your life. Experts usually recommend that the policy you buy pay you benefits until at least age 65, at which point Social Security disability will take over. If you are young, you may consider buying a policy offering lifetime benefits because it will still be relatively inexpensive.
- A policy that will replace from 60 percent to 70 percent of your total taxable earnings. A higher replacement percentage, if available, is more expensive. Evaluate your other sources of income before deciding how much disability coverage you need.
- Coverage for disability resulting from either accidental injury or illness.
An accident-only policy is less expensive but does not provide adequate protection. Ideally, both accident and illness coverage should be purchased. - A cost-of-living increase in benefits. You are buying a policy today that may not pay benefits for a decade or more.
Should you need those benefits, you will want them to have[…]
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Continue reading this Insurance Information Institute article.
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