Auto insurance. Health insurance. Homeowner’s insurance …
There are many different insurance policies that we all have, in part because they’re required by law and, in part, because we know how important they are.
But there’s one type of insurance policy that a lot of people don’t know much about and don’t realize how important it is:
Long term disability insurance.
If you’re ready to invest in your future with long term disability insurance, here are the five key things to know before choosing a policy.
1. Disability Insurance Is Not Medical Insurance
Long term disability insurance is not health insurance or supplemental medical coverage. Disability insurance is actually income replacement insurance. It’s a way to continue to bring in income when you are too ill or injured to work and unable to earn a salary.
You can use long term disability insurance benefits for anything.
Because they act as income replacement, many people use their benefits to pay for everyday living expenses, such as mortgage payments and utilities. Some people use them to pay for their children’s college tuition, to buy a new car or take a vacation, to invest in the stock market, or to pay for healthcare costs that health insurance doesn’t cover.
What makes disability insurance such a worthy investment is that there are no limitations whatsoever as to where or how you can spend your benefits.
2. The Benefit Period
Most short term disability insurance policies pay benefits for three to six months. Long term disability insurance policies can pay benefits for five years, ten years, twenty years, thirty years, or all the way until you reach retirement age.
Long term disability insurance is a great investment because you can collect benefits for decades. Short term disability insurance can be beneficial if you suffer a one-time injury that puts you out of work for a few weeks or months.
If you suffer a serious illness or injury that you can’t recover from, long term disability insurance is the best income protection you can have.
3. The Waiting Period
Every disability insurance policy has a waiting period. Also known as the elimination period, this is the time frame between the date you suffer your illness or injury and the date at which you become eligible to start collecting benefits.
No matter which insurance company you choose or how much coverage you select, you won’t collect a single penny of your benefits until the waiting period is over.
Elimination periods typically range from 30 days to 365 days, though some insurance companies only offer elimination periods from 90 to 180 days. The shorter the elimination period, the more you’ll pay in monthly premiums.
4. The Definition of Disability
The single most important aspect of any disability insurance policy is the “definition of disability.” Regardless of your job, income, or injury, you need to meet the standard of disability as defined by your policy in order to be eligible to collect your benefits.
There are two main definitions of disability:
- Any occupation
- Own occupation
With the any occupation definition, you have to be disabled in a way that prevents you from working any job whatsoever.
With the own occupation definition, you can collect benefits with a minor injury or disability, as long as that disability prevents you from doing the job you were doing prior to your illness.
Before you select a disability insurance policy, make sure that it has the own occupation definition.
Checkout this article from Physicians Thrive for everything you need to know about the own occupation definition of disability.
5. Riders Will Increase Your Premiums
All long term disability insurance policies provide you with the option to add riders. Riders are add-on clauses that offer extra benefits, such as paying off student loan debt, increasing your coverage to account for rising inflation, and allowing you to add coverage without having to undergo a subsequent medical screening or health evaluation.
Adding riders to your policy can be a massive benefit, but every one you add will add to the cost of your monthly premiums.
In Conclusion
Long term disability insurance is the single best way to protect your future unearned income. To obtain a quote, contact your local insurance agent or apply online to see multiple quotes and compare policies from different insurance companies at the same time.
