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Things to Consider When Buying Disability Insurance

  • Published: 2015-09-08 (Revised/Updated 2016-06-11) : Author: : Contact:
  • Synopsis: Information on purchasing disability insurance including benefit period, partial disability, elimination period, own-occupation coverage, and strength of company.
Disability Insurance

Often called DI or disability income insurance, or income protection, is a form of insurance that insures the beneficiary's earned income against the risk that a disability creates a barrier for a worker to complete the core functions of their work. For example, the worker may suffer from an inability to maintain composure in the case of psychological disorders or an injury, illness or condition that causes physical impairment or incapacity to work. It encompasses paid sick leave, short-term disability benefits (STD), and long-term disability benefits (LTD).

Main Document

"When buying disability insurance, you can choose from a range of different benefit periods including lifetime, to age 65 or 67."

As a working professional, it's important to consider the possibility that you might not be able to make a living someday. Illness or serious physical injury could bring your professional life to a halt, making it difficult for you and your family to make ends meet. That's why it's important to protect yourself and your earning potential against the unexpected. Purchasing disability insurance will give you peace of mind during these otherwise stressful times. Simply put, disability insurance will protect your income if you're unable to earn a living due to an illness or injury. In most cases, disability insurance can cover up to 60 percent of your regular income.

You might be thinking that in your line of work the chances of becoming disabled are too negligible to invest in disability insurance. But the truth is that no one is immune to illness or serious injury, regardless of your chosen profession, especially since many injuries occur outside of work. Professionals under the age of 35 have a 33 percent chance of being disabled for at least six months during their careers. The average length of long-term disabilities range from more than two years for those in their mid-20s to more than four years for those in their 50s. The most common types of disability are musculoskeletal conditions, heart conditions, Type II diabetes, stroke, and mental health issue. Being out of work for long periods of time can do serious damage to the savings you've accrued over the years. Major expenses such as your mortgage, retirement plan or your children's educations could be put at risk. In fact, medical expenses alone contribute to more than 60 percent of personal bankruptcies. And, of the 6 million home foreclosures since 2007, more than half of the homeowners credited medical expenses as a partial culprit.

If you're ready to protect your income by buying disability insurance, here are 5 crucial things to know.

Elimination Period

The elimination period refers to the amount of time from when the policyholder is first disabled to when the first benefit payment is received. The longer the elimination period, the less expensive the policy will be. 90 days is usually the most common choice, but depending on your needs, you might want to shorten the elimination to period to 30 days or increase it up to two years.

Benefit Period

The benefit period refers to the maximum length of time the insurance company will pay out benefits. When buying disability insurance, you can choose from a range of different benefit periods including lifetime, to age 65 or 67. The shorter the benefit period, the less expensive the policy will be. Limited benefit periods usually include two, five or ten year options. The most common option is the benefit period that lasts until the age of 65. This insures the policyholder until the age of retirement.

Own-Occupation Coverage

Own-occupation coverage is a more secure form of disability insurance, tailored to meet your specific needs. Just like the name, own-occupation coverage protects your ability to earn a living at your own occupation. This is a popular choice among professional positions such as physicians, dentists, executives and lawyers. As opposed to any-occupation coverage that defines disabled as not being able to work at any position, own-occupation will pay benefits if you're unable to work at your current position, even if you decide to work in another profession.

Partial Disability

Partial disability refers to a loss of income due to illness or injury, while still being gainfully employed. This can be helpful if you have to take a lower paying position after becoming partially disabled. If you made more money at your old position before you became disabled, partial disability benefits will make up the difference, usually up to 15 or 20% of your original income. Residual disability might also refer to a period of recovery, in which the policyholder has recovered from a disability, goes back to work and is now earning less than before being disabled.

Strength of Company

There are many varying levels of coverage when it comes to buying disability insurance. The cost of premiums is only a piece of the puzzle. You also want to choose a policy based on the financial strength of the insurance company itself. You should check the financial ratings of each company you are considering as you want to make sure the company will be there to pay claims in the future.

To better understand which disability insurance policy and company are right for you, talk to an independent adviser for a more thorough needs-based analysis. It's always best to compare policies across a range of different insurance providers.

About the Author:

Richard Reich has more than 25 years of experience as an independent life and disability insurance broker. He has personally assisted thousands of clients with their life and disability insurance needs. You can learn more at

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