Guardian Disability Insurance Brokerage

Comparing Disability Insurance on Price Alone
Could be a huge mistake
by Larry Laskin

Buying disability insurance by price alone can be one of the biggest financial mistakes you can ever make. The products can vary greatly, and if you are ever disabled, can mean the difference between collecting benefits or not.

Unlike term life insurance, which can be purchased by price alone as long as the company has very strong ratings, disability insurance has many moving parts. The most important is the definition of disability. This is what determines whether or not you are able to collect benefits. After all, this is the reason that you purchased a policy in the first place. The best definition available is called a true own-occupation definition of disability. This means that you can collect benefits if you are not able to perform the substantial and material duties of your occupation, even if you are disabled and are at work in another occupation. Some companies offer a modified own-occupation definition of disability, which will reduce or eliminate your benefits if disabled and are at work in another occupation. Other companies may offer a 2-year own-occupation definition of disability, which means that you can collect benefits for the first two years of a disability as long as you are not able to work in your occupation. After that, you can only collect if you are not able to work in any occupation for which you are qualified, or become reasonably fit, based on education, training or experience.

Many companies are able to offer lower initial premiums due to the fact that they offer a guaranteed renewable product only. This means that they are able to increase your rates at any time for everyone in your class. Of course, the insurance commissioner in your state must approve the rate increase, but they can request it at any time. Some companies even have it stated in their policies that the premiums will increase every 5 years, for example. The majority of high-end disability carriers offer a non-cancellable and guaranteed renewable product. The premiums start out higher, but the rates can never be increased. This assures that your premiums will remain affordable as long as you are working.

The residual rider, which pays for partial disabilities, is another example. Some companies do not require that you have a loss of time or duties in order to collect residual (partial) benefits. You must simply have a loss of income, due to disability, of at least 20%. Other companies require that you have a loss of time and/or duties in order to collect. In addition, some companies offer an unlimited recovery benefit after you recover from a disability and still have a loss of income. Most companies, though, only provide very limited recovery benefits. This is especially important if you are in a field such as sales, where there is a high likelihood that your income will be reduced if you are out of work for an extended period of time and then recover and return to work.

Disability insurance is probably the most important insurance you can own. After all, your ability to work is probably your biggest asset. Make sure you have the best coverage you can get.

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