What Should I Know About Buying Disability Insurance?

No one ever wants to become disabled, but in the event it happens, having the right insurance coverage can make all the difference in the world.

The first thing to determine is if the coverage will be long-term or short-term.

In the event you need disability insurance for the short-term, your best option is to move expensive premium payments into a liquid emergency fund. The advantage here is if you do not need it, it remains your money.

As for individuals needing long-term coverage, there are a pair of basic types of disability insurance offerings - group (purchased through work or membership with an organization) and private (where you buy the coverage on your own).

It is important to examine what your employer offers. If you find you require additional disability insurance, look around. Some employer plans permit employees to purchase additional coverage through the same group plan at bargain prices. You can also look into professional associations, groups, etc. and see what they offer.

There are some advantages to going the private disability insurance route.

Among them would be the benefits you receive in the event you become disabled are tax-free, as long as you met the premiums with after-tax money. Another benefit is the policy will not be tied to your present job.

When looking for private disability insurance, make sure the policy is non-cancellable. By doing so, this guarantees that policy premiums will not be changed provided you pay for them on time. Consumers should stay away from guaranteed renewable and return of premium policies.

Another item to make sure of is that policy is non-cancellable to age 65.

Also, an important rider to be in place is residual benefits. The benefit, also in the form of a loss of income policy, pays the difference between one's old salaries, before becoming disabled. This will also protect you from the downside of any occupation-policies.

In the event you have the money for it, a cost-of-living rider offers protection with your future benefits from the impact of inflation. A private policy also allows for your income to be set at the time the person takes out the policy.

Consumers looking at this insurance should keep an eye out for clauses that exclude pre-existing medical conditions or hobbies that are considered dangerous.

Purchasing disability insurance is never easy, but you can make things easier by doing your homework and being informed at the time you need to buy insurance.