When you’re shopping for any insurance, including disability, one of the main factors you look for is the premium.
It’s understandable; if you can’t afford the monthly payment, or the rates are outlandish compared with other companies, you don’t want the coverage.
Yet, in addition to the disability insurance premium, many other things make a company a good or poor choice. While you’re evaluating your coverage options, check out the company’s standings on these four key features.
1. Employer Versus Private Policies
In many industries, such as healthcare, it’s common for the employer to provide employees with disability insurance as a free or inexpensive perk.
If your benefits package includes this coverage, that’s great! But before you check off the “disability insurance” box on your to-do list, look at what your policy covers.
Group plans are covered under ERISA, a federal law that favors the insurance company instead of the policyholder. These long-term disability policies are cheap or free, but that’s about the only advantage. You don’t get any say in the coverage terms, and if you file a claim, your benefits are limited.
Instead, look for an individual policy to supplement your free employer-sponsored disability insurance. You can have multiple policies, and it’s a smart idea to have short- and long-term coverage.
2. Coverage Specifics
Disability insurance companies can legally adjust your premiums based on factors like your age, health, and job. An individual policy is more expensive than a group plan, but you get more say in your coverage.
Compare the specifics under multiple plans before you choose a policy based on the premium. The most important thing to look for is how the company defines disability.
Any Versus Own Occupation
Some insurers use the “own occupation” definition. Under this term, insureds who file a claim for disability must be able to unable to perform the duties of the job they held at the time of their disability. This is the preferred version of the term.
However, other insurance companies use the “any occupation” definition. If your policy states that your disability depends on whether you can complete “any occupation,” it will be much harder to qualify for benefits. You’ll have to prove that you can’t work at any job, no matter how easy or low-impact it is.
In this situation, it doesn’t matter if the other job requires a hefty pay reduction. If it’s possible for you to do any job and receive a wage, you won’t qualify for your disability benefits.
On top of the own-vs-any term, look into how long the benefits last and what percentage of your salary you’ll receive. Finally, find out how long the waiting period is before you can start collecting your wages after a disability.
3. Transferable Policies
You might not plan on leaving your job or state, but we can’t predict the future. Sometimes, unexpected events occur, and you want to ensure your disability policy follows you through them.
If you have an employer-sponsored policy, can you take it with you if you change jobs? Or, if your policy is an individual plan, does your insurance cover you if you move to another state?
Portability should be a crucial part of your coverage determination. If your life circumstances change and you lose your disability insurance, you’ll have to go through the process of qualifying for a plan again. By then, you will be older, and your health may not be as strong.
4. Potential Changes
You’re satisfied with your coverage and your premiums, so you want to sign up for the policy. Wait just one more minute, and read the fine print. Can the insurer change the details and rates at any time, or only when your policy is up for renewal?
Since your premiums are determined partly by your income, if you think you’ll be making more money in the future, consider adding a future increase rider. For a few extra dollars a month, you can increase your benefits without another medical exam.
Finally, read the details about the plan’s renewability. The best kind is a guaranteed renewable policy. This ensures the insurance company can’t cancel your policy, regardless of your change in income, occupation, or health. They can change your premium accordingly, though.
Conclusion
Adding disability coverage to your list of asset protection is a wise financial move. However, you want to use a company with a reputation for excellent coverage.
Review the terms of any plan you’re considering, and flag these four details to compare the companies before you buy.
