What is Disability Insurance?
Disability Insurance provides financial protection to those working individuals who become ill or get injured and are unable to work due to their illness or injury. It will typically pay you a percentage of your working income if you are not able to perform your regular work duties.
These policies provide monthly income benefits to the insured when they meet the definition of “disabled” under the policy. Not all Disability insurance policies are created equal. It is critical to understand what you are getting.
Benefits and Policy Premiums
The amount of benefit paid would always be less than what you would earn as your regular income. The percentage can vary from policy to policy and it is never more than the amount you were making while you were working. Sometimes the policy can be for a higher amount depending upon your income at that time, but if your earnings fall, then make sure to get your policy updated as you will be making payments without being eligible for the benefits. The same goes for if your income substantially increases. Make sure to get your policy updated.
Another factor which affects the premium for a DI policy is your occupation. The riskier occupations would have higher premiums. Less risky occupations are comparatively quite a bit cheaper. Some of the other factors which are taken into consideration are Age, Gender, Health and Claim history of the insured. Being a smoker can also increase your premiums for the policy.
Waiting Period
The waiting period is the time frame between the onset of the disability and the commencement of benefits for the policy holder. Most DI policies have a waiting period. The shorter the waiting period, the more premiums you have to pay while keeping everything else the same. Some policies do offer a 0-day waiting period but a 90-day waiting period is most common. A waiting period of 30 days to 12 months is available as per your need.
Benefit Period
Benefits start once the waiting period has expired. The Benefit Period is the maximum duration for which benefits will be payable. Benefits are paid until the insured is well and able to return to work full-time or the benefit period has expired, whichever comes first. The most common benefit periods are
- 2 years
- 5 years
- To age 65 or 70
The longer the benefit period, the higher the premiums given all else is equal. This is because the insurer is at the risk of paying more under the longer benefit period policies.
Conclusion
There are a lot of factors to consider when buying a Disability Insurance policy. It helps to have an experienced agent help you out with this decision. Make sure that you do not buy something which will not provide you with the required protecion when needed.
Please feel free to talk to me by either calling me or reaching out to me via email for all your insurance needs.