Long-term disability is an extended inability to work due to a physical condition. Disability can be caused by a broad range of medical issues like accidents, chronic pain and injuries, serious illnesses, and much more. If you suffer a disability and are unable to work, you could face steep medical bills along with the burden of funding your expenses while not receiving a paycheck.
You can minimize the financial risk of disability by using long-term disability insurance, which pays you a monthly benefit should you ever become physically unable to work. You can use the monthly benefit to pay bills and replace your lost income. The amount of the monthly benefit is often calculated as a percentage of your salary.
Below are a few questions to ask as you shop for disability insurance. All of these questions involve features that impact the policy’s premium. If you can’t answer these questions, you may want to do more research before you commit to a policy.
How long is the waiting period?
Many long-term disability policies have something called an elimination period, also known as a waiting period, to make sure the policy isn’t used to cover a short-term disability. The elimination period is a designated amount of time you must wait after you suffer a disability before your insurance benefits begin. Elimination periods often last anywhere from 30 days up to six months or even a year.
It’s important to know what your elimination period is, because you will likely need to have other forms of protection in place to cover you during this time should you become disabled. For example, if you suffer a disability and have a three-month elimination period on your insurance policy, you may need to rely on personal savings or even a short-term disability policy to cover the gap.
What is the maximum period of time benefits will be paid?
Just as you may be able to choose your elimination period, you also may be able to choose how long your policy will pay benefits. For example, you might choose to receive benefits for a maximum of three, five or even 10 years. You could even select a benefit time frame that lasts to age 65, which would help you bridge the financial gap to retirement.
Everything else being equal, a longer benefit payment period will usually result in higher premiums. If you’re relatively young, however, you may want protection that lasts for many years. If you are approaching retirement, a shorter time frame may be more suitable.
Does the policy cover your own occupation or any occupation?
Some long-term disability insurance policies make a distinction between what qualifies as a disability and what does not. One of the ways this determination is made is by reviewing whether you are capable of working in any capacity.
Other policies will pay benefits if you can work other occupations but are not able to work in your own occupation. Generally, an “own occupation” policy costs more than an “any occupation” policy. If you work in a highly skilled profession, however, you may want to consider a policy with an “own occupation” designation.
Are you as financially fit as you thought when it comes to disability and long-term care? Give us a call at DSM Financial to discuss your options and create a strategy that works for you.
Licensed Insurance Professional. Advisory Services offered through Change Path LLC an Investment Advisor. DSM Financial and Change Path LLC are not affiliated.
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