Getting Your Disability Insurance Right Is Critical

What will happen to your family if you’re in an accident or injury? Disability insurance provides an income, so financial issues aren’t a burden. Choosing the right type of insurance is essential for protecting your earnings.  

Social Security payments are limited, so disability income insurance is essential.

Consider these options when choosing a plan that’s right for you:

  1. Replacement income. Most policies can replace up to 75 percent of your previous earnings. Some jobs provide this type of insurance, but you may have to purchase it independently.
  • Social Security is usually not enough to replace an income. Experts recommend thinking beyond Social Security Disability Insurance (SSDI) and getting a private policy with more control.


  1. Waiting period. It’s essential to choose a waiting period that you can comfortably handle. 
  • Payments can start 3 to 6 months after a claim is filed. Can your household wait this long for income? There are policies with shorter wait times.


  1. Benefit payment plan. What type of benefit payment plan does the insurance company provide? Understanding how often and how long they can send payments is a crucial step. 
  • Policies vary greatly, and each one has its disability payment plan. 
  • Some policies pay benefits through the age of 65. Once you’re 65, retirement earnings can replace the policy.


  1. Cancelation rules. Selecting a disability income insurance policy that won’t be canceled at will is essential. This protects your earnings and family. Payments still have to be made on time, or the insurance company will cancel the policy.


  1. Cost of living adjustment. The cost of living adjustment, also known as COLA, is a separate rider you can buy to add to your policy. 
  • The adjustment uses current data to modify your monthly disability payments. 


  1. Automatic increase adjustment. The automatic increase adjustment is another option. 
  • Instead of using the consumer price index to adjust monthly payments, this option increases payments by a set amount every year. 
  • Most automatic increase adjustments are limited to five years.


  1. Future increase option. The future increase option protects the earnings you’ll make in the future. It lets you get more disability insurance in the future. 
  • Insurance companies can limit when this option is bought. Policyholders over the age of 45 usually aren’t eligible. However, each company has its own rules on age, so checking the guidelines is essential.


  1. Hospital income rider. This option pays for hospitalization caused by a disability. 
  • Insurance companies may pay up to 12 months of a hospital stay in some cases. The payments are usually set amounts, so they may not cover everything.


  1. Lifetime extension rider. The lifetime extension option lets policyholders get benefits after they’re over the age of 65. The rider depends on your age at the time of disability. The insurance companies’ rules also depend on the extent of the injury.


  1. Return-of-premium option. The return-of-premium rider lets you get your money back if a disability is avoided altogether. 
  • Payments are returned after a specific number of years. The correct paperwork for the option has to be filed first. 
  • This option has to be purchased in addition to disability insurance. 

Disability income insurance can provide an essential source of money for you and your family. Some multiple options and riders can be purchased to help you. Choose the combination of options that work best for your financial situation.

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