Disability insurance is among the most valuable, and most frequently skipped, forms of insurance, endorsed by financial experts like Dave Ramsey and insurance consultants like Courtney Rogers. Like all other forms of insurance, though, not all policies are created equal. When shopping for disability insurance to protect your family, ask and answer these eight questions.
1. Can I Get a Group Policy?
Employers, labor unions and trade associations are just three of many memberships that can get you access to a discounted disability policy. Assuming the details of coverage match your needs, this can mean cutting your premium payments by 50% or more.
2. What is the Company’s Reputation?
Although insurance regulation has increased significantly in the past couple of decades, not all insurance companies are willing to pay out claims on the time frame you need disability insurance to happen. Check out the company online, with referrals from happy customers, and with a watchdog rating group like AM Best. You may have to pay a slightly higher premium to work with a good company, but it’s worth it.
3. What Conditions are Excluded From Coverage?
All disability insurance policies will name forms or causes of disability for which they won’t pay out, for example most won’t pay if you get injured while on drugs or committing a felony. Others might exclude specific events or illnesses common to your profession. Find out what’s excluded and make the best informed decision you can.
4. What Percentage is the Payout?
Although some policies will pay out a flat amount spelled out in the policy, most will instead pay a percentage of your income. Find out what that is, and how they determine what your “income” is. This is especially important if you are self-employed and your income fluctuates from month to month.
5. What is the Length of the Payout Term?
Some disability policies will potentially pay benefits for the rest of your working life – up to age 65 or so. Others will limit benefits to three years or another set term. Which kind of payout term you get is a balance between protection and affordability. Just be sure you know before paying the first premium.
6. How is “Disability” Defined?
Some policies are inexpensive in exchange for an unreasonably limitingdefinition of “disability.” Others have complex and restrictive procedures for proving you’ve become disabled. Review the definition of disabled in your policy.
7. Does it Cover Partial Disability?
A policy might pay benefits only if you are unable to work at any job, even one that pays substantially less than your chosen career. Others pay nothing if your disability makes you able to work only part time. If you can afford it at all, get policies that cover lost income from being unable to work in your field, and partial disability payouts. Both situations are far more common than a total disability.
8. When Does the Policy Begin to Pay Benefits?
Every policy has a gap between when you become disabled and when the benefits “kick in.” Short-term disability insurance typically has a waiting period of days or weeks after your sick leave ends, with long-term coverage typically taking weeks or a couple of months. This is a factor you can skimp on, paying a lower premium for a longer waiting period. Just be sure to set up your financial planning and emergency fund to reflect the period you pay for.