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Disability Insurance Benefits Overview
Article 2 of 6 in Understand Your Disability Insurance Benefits
Purchasing a policy that will give you comprehensive disability insurance benefits in the event you are unable to work is one of the best protections you can provide yourself and your family. Understand what disability insurance benefits are available, and get the right policy to meet your insurance needs.
What to Know About Disability Insurance Benefits
You should read your policy fully to understand your disability insurance benefits, but the following points are important for any disability insurance holder:
- Disability insurance benefits are based upon a percentage of your income that you elected to receive when you applied for your disability insurance policy. If, for example, your coverage limit is 50% of your income and you made $4,000 per month, the disability benefit would be $2,000. The higher the percentage of your income, the higher your premium for your disability policy.
- Your disability insurance benefits need to be able to sustain you if you are unable to work! Know how much disability insurance to purchase by calculating your monthly finances, understanding your insurance budget, and deciding how much risk you are willing to take on.
- After you purchase a disability policy, review it immediately upon receipt. Most policies have a free look period that gives you 30 days in which you can review your policy for errors in benefits or coverage omissions.
- Your disability insurance benefits will start after your have waited out your elimination period. Your elimination period is the amount of time that you must wait before your disability insurance payments will start.
- If disability insurance benefits are non-cancelable, the insurance company cannot change the premiums and benefits shown in the disability policy as long as you pay your premiums on time.
- If disability insurance benefits are guaranteed renewable, the insurance company cannot change your benefits if you pay your premiums on time. It can increase your premium on a policy anniversary as long as it makes a similar premium increase for your entire class of policyholders.
- Know what it takes to qualify for disability insurance benefits. Review your policy and find out:
- The definition of disability
- Whether you can collect partial disability benefits
- What you must prove when applying for disability benefits after an injury
- The definition of disability
Understand your disability insurance benefits, and make sure your policy fits your needs and your budget before you finalize a purchase.
How Long You Receive Disability Benefits
When applying for disability insurance, you will be given the opportunity to choose a specific disability insurance benefit term. Typically, benefit period options will be one year, two years, five years, age 65 or, if different, retirement age. Since disability insurance benefits are designed to replace a portion of the income you would earn by working, most people do not need benefits that extend beyond their working years. If you anticipate working beyond age 65, which is increasingly common, you will need to discuss that possibility with the insurance company. Traditionally, companies have been reluctant to insure beyond age 65, but they are adapting to the longer working lives of the population.
TIP: Electing shorter benefit periods can save premium dollars because the insurance company will be liable for fewer disability insurance benefit payments. But you should realize that if you need the insurance, you probably need it to cover a disability that would permanently remove you from the workforce.
Cost of Living Increase Adjustments
Cost of Living Increase Adjustments (COLA) help disability insurance benefits keep pace with inflation. Your disability benefit is based on your income at the time of your application and remains the same, however, for an additional premium, you may be able to add a cost-of-living adjustment benefit to your policy's basic disability income benefit. COLA increases disability insurance benefits by a specified percentage, generally between 4 and 10%, after each year of disability. This benefit can be very important, especially during a lengthy period of disability.
Understanding your disability insurance benefits is the best way to ensure that you get the most out of your policy. Shop policies by comparing disability quotes to get the best coverage. Click here for a free quote on disability insurance to get started today.