How To Buy Long-Term Disability Insurance
- October 5, 2009
- 130 Views
Disability insurance is expensive – often one percent of the insured person’s income – so know your options before deciding on a plan.
You Will Need
- An assessment of your expenses
- Rate quotes
- A physical exam
Step 1: Determine how much you'll need
Consider how much money you’ll need to pay your bills if you can’t work due to an injury or illness. Long-term disability insurance typically pays 50 to 70 percent of your salary. Your salary is set when you buy the policy, but you can increase the value of the plan if your income rises.
Step 2: Check with your employer
Ask your employer if you already have long-term disability insurance as part of your company’s benefits package and, if so, how much it would pay you if you couldn’t work. Disability benefits are tax free if you pay the premium, but are taxed if your employer pays.
You may be able to purchase extra coverage through the same insurance company that manages your group plan.
Step 3: Pick a time frame
Decide if you want a policy that pays out for five or 10 years, or one that pays until you’re 65.
Get a lower rate by taking the longest waiting period – the time you have to wait before benefits kick in – that you can afford.
Step 4: Weigh your options
Weigh your options. Some policies are guaranteed renewable, which means the insurer can’t drop you as long as you pay your premium. Others are noncancelable, which means your premium can never go up. Also consider a cost-of-living option, which adjusts your benefits for inflation.
Consider “own-occupation” coverage, which pays benefits until you’re able to return to the same position you had, rather than just any job.
Step 5: Check out companies
Check with your state’s department of insurance to make sure that any company you’re considering is licensed and doesn’t have complaints against it. And check the company’s financial soundness through a service like Standard & Poor’s or Moody’s.
Step 6: Compare rates
Get rates from several companies; just make sure you’re comparing quotes for similar policies. You can buy disability insurance through a broker, insurance agent, or financial adviser. In most cases, you’ll need to undergo a physical exam.
Did you know?
About one third of workers over age 35 will become disabled for over three months sometime before retirement.
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Comments (1)
Thank you for great info
An issue often not understood by potential consumers is what disability insurance to purchase. A lot of employees think that they are covered by employer provided disability which is governed by ERISA laws. One should realize that in almost all cases, a policy governed by ERISA is not worth the piece of paper it is written on.
For example, see this http://illnessandinsurancehell.blogspot.com/2009/10/erisa-schmerisa-or-lessons-i-have.html
and
http://hartford-disability-denial.blogspot.com/2010/12/what-goes-on-in-erisa-litigation.html.
Also ABC news coverage at http://www.dilawgroup.com/
However, my hope is that laws should be changed to it mandatory for the employer and disability insurance company to provide the employee a CLEAR understanding of
a)what is the percentage of claims that the disability insurance company has approved and continued with
b) what is the course to redressal of her grievances and again, what are the chances of success.
This empowers the consumer to make an informed choice of purchasing insurance through employer or on her own.
about 1 year ago by Rohit_Verma
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