Frequently overlooked but possibly more important than life insurance, disability insurance protects your income in the event that you become ill, injured, or disabled and cannot work. When you own disability insurance and develop a disability that does not allow you to work, you are eligible for monthly benefits of approximately 60 to 80% of the income you would be receiving were you able to work. These monthly benefits allow you and your family to maintain your lifestyle and cover living expenses.
There are two types of disability insurance available: short-term and long-term.
Short-Term Disability
This type of disability is frequently provided by an employer. When an individual becomes injured or ill and is covered by short-term disability, they receive an income during the early period of their injury. Depending on the insurance provider, the individual may receive disability benefits for 2 weeks or up to 2 years.
Long-Term Disability
Long-term disability may be offered by an employer or purchased separately by an individual. This type of disability replaces income during an extended period of time, normally for 2 years, 5 years, or until the disabled recipient turns 65. There are two types of long-term insurance available to individual consumers:
– Non-cancelable long-term disability: Under this type of long-term disability coverage, the recipient has the assurance that their premium (monthly cost of insurance), will never be raised, and, that their policy (the insurance contract) cannot be cancelled as long as it is being paid on time;
– Guaranteed renewable long-term disability:This type of policy, usually less expensive initially, allows the premium to be raised, but only if it affects a class of policy-holders.
Frequently, disability insurance is provided as part of a benefits package through an employer. In this instance, short-term disability coverage is most often the type offered. Insurance through an employer is called group coverage, and is less expensive than purchasing individual coverage.
However, disability insurance provided by an employer may not provide adequate coverage or benefits. If this is the case, you can purchase individual insurance.
Purchasing disability insurance individually is usually very costly. Still, when you opt to purchase disability insurance you are able to choose a policy that provides you with the best coverage. You can purchase individual disability insurance through an insurance company.
Choosing an Insurance Company
Selecting a good insurance company means doing your research. Comparing and contrasting different companies can help you find the best one, and therefore, the best policy.
To select companies you may eventually purchase a policy from, look for:
– Financial soundness. It is essential that a potential insurer be fiscally secure, and therefore able to pay claims;
– A high service rating. High service ratings indicate that other policy-holders are happy with the company, and that the company takes care of customers;
– A high claims service rating and record. A company that provides dismal claim service is worthless. Check its background for complaint and lawsuit records.
Choosing a Policy
When you choose a policy from an insurance company, you give yourself the ability to control your coverage and protection. It is vital to compare policies from a multitude of companies so you know that you are getting the best policy and the best premium.
Choose a good disability insurance policy by:
– Selecting a non-cancelable policy. As long as your premium payments are made on time, an insurance company cannot cancel your policy;
– Selecting a guaranteed-renewable policy. Your policy’s premium will never increase;
– Selecting an own occupation (“own occ”) policy. You will be considered disabled if you are unable to perform your own job;
– Selecting a policy that offers benefits until you turn 65;
– Selecting a policy with a benefit waiting period of 90 days or less.
Always obtain at least 3 different premium quotes from 3 different insurance companies so you know you are getting the best deal.
Dealing with an Insurance Company
When the time comes that a disability prevents you from working and you wish to file a claim, the process may require some vigilance. Insurance companies must know that the benefits they will provide will only be paid after every possible alternative has been exhausted.
When you have filed a claim, the insurance company may videotape you to make sure your claim is legitimate, although they may not videotape you through your windows, or audiotape you.
After filing a claim, a company doctor may arrange an appointment with you. Feel free to inspect this doctor’s malpractice record through the state medical board and ask your own doctor about him or her. Request a different doctor from the insurance company if the one inspecting you has been sued. Even if you have not filed a claim, a company may want their doctor to perform periodic check-ups.