Disability Insurance
Why do you need Disability Insurance?
Whether it’s a car or household accident or a negative medical diagnosis, unanticipated misfortunes occur all the time. You can never anticipate when tragedy will strike, and if an injury or an illness puts your ability to work on hold, disability insurance is there to replace a portion of your income. Premiums for disability insurance are all different depending on age, income, occupation, and which policy best suits you. Essentially the more disability coverage you pay for, the higher the premium will be.
Terms Used In Disability Insurance Policies
Benefit Amount
Disability insurance typically will pay anywhere from 60-80 percent of your income while you are on leave from work. This coverage is put in place to cover your basic needs if you cannot work and have no other source of income.
Term of Benefits
There are different coverages that span different time lengths. There are annual plans, two year plans, five year plan, until a certain age, and even life long Disability insurance plans. The longer the coverage plan that you select, like all other life insurance policies, the higher the premium that you will pay.
Elimination Period
The elimination period is the time one waits from the onset of their disability to the point where they actually receive benefits from the coverage. Money can be saved if the insured waits longer before the benefits are paid. The average waiting period in the industry about three months, while most policies allow you to chose a wait period form anywhere from 60 days to two years.
Noncancelable
This simply means that once the insured is provided with a disability insurance policy that they cannot cancel until the coverage stops covering everyone in your occupation. IF you have a noncancelable policy the company cannot raise your premiums, which is why you are more likely to pay more for this type of policy than others.
Guaranteed Renewable
Opposite of a noncancelable policy, a guaranteed renewable policy also cannot be canceled, however, the company can raise the premiums provided that it will raise the rates for all policy holders in the same class. Premiums for guaranteed renewable policies tend to be cheaper than that of a noncancelable policy.
Own Occupation/Any Occupation
Own occupation insurance coverage will pay an individual when they can't work in their specific occupation. Many professionals like doctors, dentists, attorneys etc. chose own occupation coverage. For any occupation coverage, to collect the policy benefits you must be unable to work in the occupation that you are suited for based on your job training and education history. Own occupation coverage tends to be more expensive than those that consider you disabled only if you can't work at all.