YOU ASK:

What things should I look for when I buy disability insurance?

WE ANSWER:

When you are thinking of getting a disability insurance policy, here are some of the things you should look for to help make sure that you have the policy that will sufficiently protect you against disability:

  • Definition of disability. It is best to get an "own occupation" policy. This is defined as not being able to continue with the profession or occupation that you have. This is the best kind, since it will pay if your disability prevents you from doing your present job. The other kind of policy, which covers "any occupation", will not pay if you can do other kinds of work. For instance, if you are a radio announcer and you lose your voice due to a sickness, an "any occupation" policy will refuse to pay you benefits since you can still find other jobs.
  • Length of coverage. Look for a policy that will provide coverage until you are able to claim from your retirement benefits, that is, at age 65.
  • Look for a policy that is guaranteed renewable. This means that you should be able to renew your policy even if you gain a medical condition that presents a higher risk of disability or if you move from a higher occupational risk class. The insurance company is obligated to renew your policy, unless you fail to pay your premiums on time. Of course, the insurance company may change the premiums if premiums are changed for all the policies that fall under the same risk class as you.
  • The length of benefit payments. This depends on how much you are able to survive without an income and are only relying on your savings or emergency fund. The longer the waiting period before the insurance will start to kick in, the lower your premiums will be.
  • The amount of monthly benefit. The benefit is usually a percentage of your current income. The lower the percentage, the lower your premiums will be.

Please be aware that your choice of features will also affect your premiums. But it can also help to keep in mind that if you pay your own premiums, these are usually tax-deductible.

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