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Personal Perspective

7 Things to Know Before You Buy Disability Insurance

By October 10, 2016No Comments

No one wants to consider becoming disabled, but what would you do if a catastrophic injury or illness prevented you from working? Disability insurance kicks in after 90 days and would pay you up to 60 percent of your annual salary. As you consider buying this valuable coverage, remember seven important things.

  • Assess Your Risk Your occupation, hobbies, family health history and current health are all factors that affect your risk for developing a disabling injury or illness. Honestly and accurately assess your risk as you decide if disability insurance is a wise investment for you. If you don’t know your risk, talk to your insurance agent and ask him or her to look in the Standard Industry Code and find out if your occupation is considered high-risk.
  • Calculate Your Average IncomeThe disability insurance you’re eligible for depends on your annual net income. If your income fluctuates, average your income from the last three years and use that figure to calculate the amount of disability insurance coverage you need.
  • Perform a Needs-AnalysisA needs-analysis reviews expenses like your mortgage, debt, savings and retirement accounts and determines how much income you need if you become disabled. With this figure, you can make sure you buy a policy with adequate coverage.
  • Apply When You’re HealthyMost disability insurance carriers review the medical records of potential customers and require a physical and blood tests. If you wait to buy a policy when you’re injured or diagnosed with a serious illness, you may be denied.
  • Consider StackingIf you purchased disability insurance years ago, you used your income at the time to determine the benefit amount. Consider purchasing an additional policy now. It stacks on top of the existing policy and covers any income difference, which gives you financial peace of mind.
  • Shop Around

Insurance companies offer a variety of products at varying costs. Shop around to find the policy that meets your needs.

Don’t rely on price alone. Check out the other benefits and features of the policy, too.

Find out if cancer in your family history automatically excludes you from getting a policy.

Verify the carrier’s definition of disability.

  • Drop the Policy When You Turn 65You may not retire when you turn 65, but drop your disability policy anyway. If a doctor diagnoses you as disabled when you’re over the age of 65, the policy won’t pay because according to its definition you are retired.

Disability insurance is a valuable asset. Use these seven tips and talk to your insurance agent as you decide if it’s right for you.