When you’re healthy and working, it’s hard to imagine being disabled by illness or injury. But it can happen.
The odds are that one in three working Americans will become disabled for 90 days or more before age 65.
Your chance of becoming disabled is much higher than your chance of dying during your working years. For example, a 35-year-old man is 2.5 times more likely to become disabled than die before age 65; a 35-year-old female, 3.6 times!
Individual disability income insurance can help provide protection against the financial uncertainties a disability causes. To make an informed decision, consumers should understand the definitions behind the terms below. Please note, these definitions are not complete and will vary according to the terms of the individual policy.
Total Disability: Individuals are considered to have a total disability if they are unable to perform occupational responsibilities as a result of illness or injury.
Partial Disability Benefit: If one is partially disabled and the ability to perform one’s job is impaired, it is important to consider protection to supplement lost income in case they cannot return to work on a full-time basis.
Non-cancellable: Insurers cannot terminate coverage as long as the policyholder pays his or her premium on time. The insured, however, may terminate the policy at any time. What’s more, this type of policy locks in premiums until a certain age, usually 65.
Weighing Options
By making informed decisions regarding essential coverage options, solid disability income insurance protection can be purchased at cost-effective rates. Consider the following alternatives:
Benefit Period: The amount of time benefits are paid for a disability. Another premium-saving solution is to elect a shorter, five- or 10-year benefit period instead of choosing to continue benefits to age 65.
Elimination/Waiting Period: The minimum amount of time an insured must be disabled before collecting benefits. Elimination or waiting periods vary according to the terms of a particular policy. On average, the longer the waiting period, the lower the cost of the policy. In most cases, it’s better to save on the waiting period than the benefit period. If price is a consideration, it is recommended to move the waiting period out.
Riders: A rider is optional, added coverage on a policy and usually carries a premium. It’s important to consider adding a cost of living rider for coverage that helps disability benefits keep pace with inflation. Coverage provided by all optional riders can be refused.
The Importance of Disability Income Insurance
Amidst all the talk about the importance of long-term financial planning – from 401(k)s to IRAs – isn’t buying disability income insurance coverage an equally important consideration? There’s been a greater emphasis put on cost-effective, flexible products that the consumer needs. Today you may be insurable, but tomorrow – who knows?
