Why purchase disability insurance?

Current statistics show that approximately 38% of people whose age are in range of 35 to 65 may acquire disability lasting for at least 90 days. Such predicted disabilities may be as minor as a broken bone, an unusual pregnancy, or an emotional condition, which eventually may cause you to keep away from your work. This is where disability insurance can kick in, and this would definitely give a relief to you for taking such precaution. Apparently, dealing with disabilities without any coverage will only result into a continuous debt.

Some misconceptions

Most people do not see the need to purchase additional disability coverage simply because they have been covered by insurance through work. Disability insurance offered by employers may only provide 60% of the income. Such policies are normally set to a $10,000-monthly maximum, which is less than 60% compared with highly compensated employees.

Moreover, the issue on tax can be another problem. Some benefits are fully taxable, meaning that net pay can be less than 60% of salary. Now, how would employees survive on 40% of their salary? Perhaps they hardly survive.

When looking around for the best policy, best to look closely on the company's profile and history. Determine the company's strengths, whether it has been financially sound for certain period of time, and is capable to play claims in the future. Also, make sure to check renewability of your contract. Below are three options that you may need to consider:

Non-cancelable contract may be best for you. This allows only one person to make changes or cancelation of policy and not the insurance company.

Guaranteed renewable policy may also be an option for you. This does not allow insurance company to just drop you however they can raise amounts of premium rates. Conditionally renewable policy may be the worse insurance disability policy as the company can have authority to change rates at any period or put any condition on your agreed upon policy.

Also, it is best to look how the insurance company defines total disability:

Own-occupation disability is said to be the most lenient, consumer-friendly approach. This simply means that once you are disabled and thus unable to perform primary work, you will receive disability benefit, even if you can still complete other tasks.

Any occupation disability is said to be the most stringent definition as this means that you cannot receive benefits unless you are unable to do any work and is totally unemployed.

Moreover, purchasing partial disability or residual coverage may also be an option for you. This policy means that the insurance company pays the partial disability benefits while the employer would pay for the actual time you have been allowed to work.

Disability insurance costs

The cost of disability insurance varies depending on factors such as age, occupation, gender, and health history. In pricing your policy, the insurance company will categorize you based on occupation class. You will most like pay more once your occupation is determine to result in a disability.

When you decide to purchase disability insurance, it only means that you are being financially cautious to future uncertain. Consider all the factors involved when you purchase. And be sure to make an informed decision. You may probably be relieved that you did at the end.