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The loss of income due to a disability can be devastating to a family. Without the
ability to pay day-to-day expenses such as mortgages, car loans, credit cards, etc.;
savings and even retirement accounts can be quickly depleted. A well-planned disability
income policy can not only help protect you against income loss due to an injury or
sickness, but it can provide you peace of mind.
THE BASICS
Most Disability Income
policies provide income replacement in the event of a covered illness or injury.
Disability policies come in a variety of packages covering many different options. The
following is an outline of what makes up a disability policy.
The
Benefit: The amount of income replacement benefit, the policy will pay out in
the event of a disability.
The
Benefit Period: The amount of time a benefit payment will be paid by the
insurance company to the recipient. Typical benefit periods include a 2-year, 5 year, to
age 65 benefit periods.
Elimination
Period: The amount of time after an injury or sickness before claims can be
received by the insured. Elimination period can vary from 30 days, 60 days, 90 days, or
180 days.
Occupational
Class: Insurance companies rate occupations depending on the probability that a
sickness or injury will occur. A high-risk occupation such as a truck driver is more
expensive to insure than a low risk occupation such as an office manager. Depending on
your occupational class, the insurance company will determine an occupational rating.
Supplemental
Benefits: Many insurance companies offer extra benefits that can be added to a
policy for an extra fee. These benefits can include cash riders, special occupational
riders, etc.
HOW TO CHOOSE THE RIGHT
BENEFITS FOR YOU !
Customizing a disability
income protection policy is very easy. Many insurance companies that offer disability
income plans offer flexibility in all the above items.
Choose
the benefit that is right for you: Total all of your monthly expenses and subtract
them from any income sources that you would have regardless of your ability to work.
How
long can you afford to be without an income: The elimination period is one of the
most important choices in your disability income policy. If you have adequate savings, you
might be able to sustain a longer period of time without an income. If you can not go a
long period of time without an income, you should consider a short elimination period.
How
long will you need benefits for: A two year benefit period is typically the least
amount of time a disability policy will pay benefits for. The longer the benefit period
you choose the more financial cushion you will have in the event of a disability.
THINGS TO CONSIDER
What
can you afford?
The ability to customize
a disability plan gives you a lot of flexibility in the premiums you will pay for your
disability policy. Do not over load yourself with a disability policy that has too many
benefits, which you will be tempted to drop later because of the expense. Instead,
customize a plan that is affordable and sensible to your financial needs. You can always
make adjustments later.
Read
the fine print and Ask questions!
Every insurance company
has a different definition of a disability. With some policies you must be disabled from
performing all income producing duties. Other policies define disability as the inability
to perform the job in which you are trained. It is important to understand your policy
definition of disability. If you have questions, don’t be afraid to ask.
Use the following Quick Calculation Guide to determine
how much disability income protection you need: |
