When Help Is Essential: Disability Life Insurance
Few of us can afford to lose our income for an extended period, and many of us depend on a regular paycheck even in the short term. A construction worker who breaks his leg, a typist with an arm in a sling, a manager with a head injury--any of these things can happen, and from a variety of accidents. To ensure you can maintain your lifestyle and not lose anything you hold dear, disability life insurance is a vital expense. It's also one you can make affordable by exercising due diligence.
How Long Will You Be Disabled?
Since your predicament will likely come from an accident, there's no way to tell. At the least, you need to look into short-term disability insurance. Each policy is unique, but this one will pay immediately or within a couple weeks, but only for a certain amount of time (two years at most). Most accidents are shorter term, which makes this kind of disability life insurance very important. Long-term disability insurance might pay benefits for a few years, or it might pay them for the rest of your life. Again, it depends on the policy provider and specific language in the policy. The benefits generally take longer to begin--weeks or months.
Since a disability life insurance policy is intended to protect you in the event of an accident or serious medical condition, they usually include a feature that ensures your coverage will be in place. One of these is non-cancellation. A non-cancellable policy will continue every year, with the same benefits and at the same premium, as long as you pay your premium on time. A guaranteed renewable policy offers similar protection, with the difference that your insurer can raise the premium when the policy is renewed--but only if the premium is raised for everyone in your rating class. Check for these protection features when you shop around.
Types of Disability Life Insurance
Some common types of disability life insurance include:
- Employer-provided: Some states require this, but not all. If your employer pays the premium, your benefits will likely be taxed. It's a great benefit, but benefits for any policy won't equal your full income, so if you can't afford for your benefits to be taxed, you may want a supplemental individual policy.
- Individual: Your benefits, waiting period, and length of benefits will all be expressly stated. While this obviously costs more than employer-provided, your benefits are usually tax free, and you have more freedom in choosing additional options (to be discussed shortly).
- Social Security: If you've worked continually, you may be eligible for Social Security benefits if you're disabled before age 65. While these benefits are more exclusive, payments are usually higher.
Your individual disability life insurance policy can include different options to protect you further. These will raise your premium, but often the additional cost is minimal in relation to the benefit:
- Cost of living adjustment: Benefits rise over time to help match inflation.
- Partial disability rider: If you're able to go back to work part time, you can still receive partial benefits.
- Return of premium: If you go an extended period with great health and don't make any claims, you can have some of your premium expenses returned.
- Waiver of premium: While disabled, you often need all of your benefit money. This feature allows you to quit paying premiums after 90 days of disability.
When you pay for disability life insurance yourself, there are different ways to keep premiums low. If an insurer has to pay for benefits for a shorter time, they won't require you to pay as much. Thus, opting for a longer wait period, or a shorter benefit period, will save you money. The decision comes down to this: how long can you get by without benefits? If you save on premiums, you may have additional savings to help sustain you. A fail-safe method for saving money is to shop around. Let a service such as NetQuote.com find all the potential insurers for you so that you can easily compare their costs. It's free, easy, and leads to the peace of mind these policies are designed to give.