Single? Don't Skimp On Disability Insurance

You are throwing away money when buying the cheapest policy on the market. The odds of getting paid a monthly benefit under that contract may be extremely lower than receiving benefits from a quality contract. Individual disability insurance is designed to replace anywhere from 45-60% of your gross income. This is designed on a tax-free basis should a sickness or illness prevent you from earning an income in your current occupation. Every disability insurance plan has a different definition of total disability in the policy. There are three basic types:

Own-Occupation Disability Insurance

If are deemed incapable to perform the duties of your regular occupation, the company will pay the claim. You are even allowed to get another job in a different field and still be paid. This is the only plan that does not penalize somebody for going back to work in a different occupation while on a claim.

Income Replacement Insurance

This is the most common definition of total disability in the last few years. Most insurance carrier has moved to an income replacement definition, if they stopped offering own-occupation disability insurance. You will be penalized or lose the benefit if you work while on a claim.

Gainful Occupation Coverage

This is a very common definition in an employer sponsored long-term disability policy. This is also very popular with property and casualty insurance companies who have decided to release a disability insurance policy to offer more options to their clients and put a foot in the market. This is the worst possible definition and leaves whether you are disabled or not up to the insurance company itself.

The first aspect of any disability insurance policy one needs to understand is the renew ability feature. Non-Cancelable and Guaranteed Renewable guarantees you that after you purchased the policy there will be no changes to your premium schedule, monthly benefits, or policy benefits to age 65 or whatever age you elected. The insurance company legally cannot change anything concerning your policy unless you want them to. A Guaranteed Renewable plan states that an insurance company will probably not change anything about the policy, but they can if they choose to at anytime. A Conditionally Renewable plan is a policy that offers you virtually no guarantees for your disability insurance policy. Stay away from these policies; you will get burned. Next you will need to know what you can expect if you get disabled.

There will be a period of time from the on set of your disability till you receive a benefit check. This is called the elimination period. The industry has made the most common offer a 90-day elimination period for an individual disability insurance policy. You can expect a high charge if you choose to go with a shorter elimination period of 30, or 60 days. Most companies will also give you a price break if you can go longer than 90 days. Now once the checks star coming you have moved into your benefit period. Choosing this is most important. You don't want to be left with out money to live on if you are disabled forever and picked a five-year policy. This is time frame you will be getting a check, think long-term, if you don't need it than who cares, you might sometime later. Once the elimination period has been satisfied, monthly benefit checks will begin to come in at the end of each month. Your benefits will stop when you return to work in your occupation, or another occupation making the same income. The most popular choice for a disability insurance policy is to age 65. Some people prefer to go with lifetime with a higher premium.

A Cost of Living Adjustment is a rider that kicks in if you actually go on a disability insurance claim, it will increase your monthly benefit every year while you are on a claim along with the CPI up to the maximum you elected. You have to be disabled for more than a year to use it. A Future Increase Option is a rider locks in your insurability for a certain period of time (normally to age 55). So, as you increase in age, and increase your income level, you can increase your monthly benefit regardless of any health changes. An Automatic Increase Rider increases your total monthly benefit each year for about five years. Your premium will go up with this rider each year because you are buying more disability insurance coverage. Make sure you look at these carefully and pick one that is best for you if you want the extra coverage.