If you and your loved ones depend on your salary to support yourself, you probably need long-term disability insurance.
Think about it: if you became disabled, even for a few months, how would you and your family cope? Who would pay your bills? A disabling illness or injury is one of the leading causes of bankruptcy in the United States.
Most people don't realize that their chances of becoming disabled are greater than their chances of dying prematurely. Yet they are more likely to purchase life insurance than disability insurance. For this reason, people in the insurance industry call disability “the forgotten risk”. According to statistics from the Journal of the American Society of Chartered Life Underwriters, if you are between the ages of thirty and fifty-five, your chances of becoming disabled are two to three times greater than your chances of dying.
If you are thirty-five years old, you have a 50% chance of experiencing disability during the last three months or more before retirement. One in seven workers will become disabled for more than five years before reaching the age of 65.
Many people mistakenly believe that the government or workers' compensation will pay them an income if they become disabled. In fact, more than 80% of people who apply for Social Security disability benefits are rejected. Social Security does not pay benefits in the event of partial or short-term disability. Your disability must last one year or is expected to last one year before you can collect Social Security. Workers' compensation only pays if you've been injured on the job, and benefits are often limited to a few years.
Your health insurance will cover your hospitalization, doctor and other medical expenses, but you will still not have a salary. Long term care insurance only covers bills from nursing homes or assisted care facilities. Disability insurance, however, does not pay the bills. Instead, the insurance company gives you money on a regular basis.
It is designed to replace your salary so that you and your family do not face financial hardship during any time you are too sick or injured to work.
What should you look for when buying long term disability insurance? First, the insurance company itself should have the highest rating from Moody's, A.M. Best, and Standard and Bad. These agencies rate companies in terms of capitalization, growth, earnings and other indicators of financial stability.
Second, you need to make sure you understand the terms of your policy. Some policies require a waiting period before you start receiving benefits. For example, your policy may have a six-month waiting period before benefits are paid. In this case, your benefits would begin six months after the time of disability.
The waiting period is often referred to as the waiting period. The choices usually range from 30 days to 720 days.
Look for a premium waiver provision. This means that if you become disabled, you will not have to continue paying for your disability insurance policy.
What are the terms of contract renewal? If your policy is not automatically renewable, the insurance company has the right to cancel it.
Payment period options are another consideration. Some policies will only pay for a certain period of time, sometimes for only two years. Other policies last a lifetime. The most popular policies pay benefits until you reach retirement age, when you can start collecting Social Security payments.
Most policies include a residual disability clause. If you have a disability, you will very often return to work part-time at first. Or because you've been off work for a while, it may take time to rebuild your business to the level it was before you became disabled. Your insurance should provide income for both of these scenarios.
Check the policy for a recurring disability benefit. A recurring disability is a disability that occurs after you have recovered from your original disability. Your insurance should waive a new waiting period and/or not require proof that the two disabilities were linked.
When you buy disability insurance, you buy it based on your income level. The more money you earn, the greater the benefit of your policy. But you also need to understand that your income will increase as you get older. For this reason, you want a future increase rider or an automatic increase rider. These riders allow you to keep your policy but increase your benefit amount as your income increases as you age.
When you purchase your insurance, certain factors will affect your price. You will pay less for insurance if you decide to replace 50% of your income instead of 80%. You also pay less if you opt for a longer elimination period. The insurance company takes into account your current state of health and may exclude pre-existing conditions. Women and smokers may pay more for disability insurance because they make more claims than non-smoking men. If you work in a high-risk job, your policy may cost you more.
Disability insurance policies can be confusing. It is always best to sit down with a professional insurance agent to discuss policy terms together and ask questions until you fully understand the details of the policy quotes presented.
