Things to Remember When Shopping for Disability
Definition of Disability (The way
the policy defines disability can make a difference in benefits.)
Disability (When do you want benefits to kick in?)
disability vs. partial disability. Check out terms and timing of
|Coverage (Consider coverage that pays for accident AND illness.)
you get older, you're more likely to require coverage for illness.
Benefits (Is this benefit important to you?)
- Residual payments make up the
difference between full income and partial income.
Disability (Is this included in your coverage?)
- Certain conditions, including
loss of sight, speech, hearing, or use of limbs, entitle you to full
benefits regardless of your ability to perform parts of your regular job.
|Amount of Benefits
(Make sure you get the benefit you need.)
- The amount of stable, earned
income at the time you purchase your policy determines monthly benefits.
Typically, benefits are 70 to 80 percent of your monthly income.
|When Payments Begin
(Make sure you stipulate when payments begin. The timing can reduce your
- Immediately on becoming
- A length of time after the
Coverage (Electing shorter benefit periods can save premium
- Since disability benefits are
designed to replace earned income, most people don't need benefits after
the working years (typically age 65).
Factors (You decide which option(s) suit you.)
- A cost of living adjustment,
generally 4 to 10 percent, is available for additional premium.
- Most policies include a waiver
of premium provision, which eliminates premiums after
90 days of disability.
- Some include option to buy
additional coverage allowing you to bypass a medical examination
or the need to submit further proof of insurability.
(Make sure you know this.)
- Non-cancelable - The insured
has the right to continue by timely premium payment. The insurer cannot
change premiums/benefits of the policy.
- Guaranteed renewable - The
policy automatically renews with the same benefits. The premium can be
changed for an entire class of policyholders.
- Optionally renewable - The
policy is extended at each anniversary or premium date at the option of
- Payments under disability
policy are not subject to income tax.
- Exception: if premiums were
employer paid, some/all of benefits may be taxed.
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