Disability insurance is a type of insurance that can be used to provide income in the event that a person is unable to perform their work and earn money as a result of a disability. Although disability insurance is not typically a legal requirement, knowing that you have a disability insurance policy in place can provide peace of mind that you and your family are financially protected if ever you were to become injured or ill.
However, because there are so many different types of insurers out there that offer a wide variety of disability insurance policies, it can be hard to know where to begin. Consequently, if you are in the process of buying disability insurance, let’s discuss 3 important factors that must be taken into consideration.
Understand the Difference Between Short Term and Long Term Disability Insurance
When shopping for disability insurance, it is important that you are able to make the distinction between short term and long term policies. Short term disability insurance policies offer a worker a portion of their salary if they are unable to work for a short period. This period typically lasts for three to six months. Long term disability insurance however offers a worker a portion of their salary if they are unable to work for a longer period. This period typically lasts for over six months.
Both types of disability insurance policy have a period that a person must be disabled for before that individual is entitled to claim disability benefits. This period of time is called an elimination period. Fundamentally, if a person becomes disabled, they must wait until the elimination period is over before they start receiving benefits. If the individual is able to work before the elimination period is over, the person will not receive any benefits. In the majority of cases, employers and employees typically settle for a long term disability insurance policy alone as this covers catastrophic illnesses or accidents that can have prolonged financial impacts.
Assess Your Level of Risk
No one likes to think too much about the possibility of being injured or falling ill and being unable to work. However, accidents can happen, and nearly everyone puts themself at risk every single day. Just going about day to day tasks like getting public transport or making a hot drink can be dangerous. Of course, some jobs are naturally riskier than others and therefore insurers typically use a Standard Industry Code for every occupation. This code looks at the characteristics of each specific industry to determine an approximate assessment of risk.
Moreover, it is crucial to note that you should apply for disability insurance while you are still healthy and able to work. The majority of insurance policies require medical underwriting. This can include reviews of your medical records, blood tests, and in some cases, a physical assessment. With this in mind, while you are young and healthy, you are usually more likely to be underwritten successfully. Remember, your ability to earn an income is one of your greatest assets, so it is strongly recommended that you take steps to protect your future earning potential.
Compare Insurers and Policies
Disability insurance comes in many forms and therefore it can also be purchased from a wide variety of providers at several price points. Ordinarily the price of a disability insurance policy depends on the length of the elimination period, the benefit period, and the strictness of the definition of disability within the policy. Navigating these rules can make it easier to find the right coverage for your needs. As a general rule, prices tend to align with the specific features and benefits of each policy.
Do plenty of your own research and aim to speak to a number of insurance advisors. There are some brilliant insurance comparison websites out there that can be a highly useful resource. You can also seek advice from an independent consultant who works with a number of insurance companies. Furthermore, some policies can disqualify you from coverage if you have a family history of certain illnesses such as cancer and therefore being upfront about your medical history with your advisor is vital. You might even want to complete a needs-analysis that takes your current and ongoing expenses such as any mortgages, debts, and savings into consideration.
Above all, if you earn an income, disability insurance can prove to be a valuable component of your financial safety net. Act fast and buy disability insurance while you are still young and healthy and remember to do your research to find the right insurance coverage for your needs.
Taking out insurance policies can protect you and your family from financial hardship. For more information and support, check out this guide to some of the most popular types of insurance.
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