Disability Insurance Policy
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In order for it to be a good one, a disability insurance policy needs to provide a policyholder with all of the information he or she needs if a disability were to become a reality. For example, when do benefits from a disability insurance policy begin to accumulate? The answer is that most disability plans that are long-term have a waiting period that is most often around three months. In some cases the waiting period can be less, such as 60 days while in other cases it will be greater such as 180 days or 365 days (one year) and 730 days. Sometimes an individual can determine his or her own waiting period. Ask yourself how long you can go without a steady paycheck. The shorter period you can go without the shorter waiting period you require. Be aware however that the longer your waiting period is, the lower your monthly premium will be.
When it comes to a disability insurance policy, you need to find out how long the benefits will be paid out for? In most cases, you can go with the maximum time that your benefits will be paid out for. The most common types of benefit periods include two years, five years and/or up to the age of 65.
A disability insurance policy should let you know exactly how much disability insurance you can get. Ask yourself how much you need? Most group insurance plans will replace an estimated 60 percent of your income (net income, not gross) in the event of a disability but you should strive to get 80 percent coverage on the disability insurance policy if you can afford it. Be aware that if you buy a disability insurance policy with your “after-tax money” then usually this means that the disability benefits will be free of income tax. However there are cases in which these disability benefits will be taxed.
If you are a self-employed person or a small business entrepreneur and if you are not knowledgeable about a disability insurance policy then you should talk to an insurance agent or a financial planning expert about any special insurance considerations as well as your overhead expenses.
In order to decide how much coverage your disability insurance policy would need, figure out how much of your monthly income would be needed to cover your bills and your living expenses. If you were to suddenly become disabled, would these expenses go up, go down or possibly stay the same? You must look at your expenses as realistically as possible. Expenses related to work will probably decrease while medical expenses will increase and educational expenses might become necessary if retraining is in order. Premium waivers are a part of some disability insurance policies but not others. Take the time to carefully consider a disability insurance policy and all it has to offer you before you make a final decision. Make a list of what all of your monthly living expenses are and carefully consider what you spend on everything in the run of a month. Figure in all small purchase as well as large purchases.
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