5 Questions To Ask Before You Purchase A Policy
Disability insurance rates are dependent on many different components in a policy. The inexpensive policies available are typically the ones that pay out fewer benefits in fewer situations. The inexpensive policies may actually cost you more because of benefits not paid because of restrictive terms and provisions. Before you make a decision on a policy, there are five primary questions that you should seek answers to.
Question 1: How much coverage may I qualify for?
You can typically be approved for about 60% of your taxable earned income. Disability insurance rates will be higher for policies that have larger monthly benefit amounts.
Question 2: What will determine whether or not I’m disabled?
While there are several factors, one of the most important provisions of any policy is the definition of total disability. The definition of total disability varies from one policy to the next. Some policies pay benefits if you are unable to perform the duties of your own occupation even if you choose to find working doing something else while you are disabled from your regular occupation.
These definitions are of the most comprehensive type and are often referred to as true own-occupation disability insurance policies. These policies are the ones that will pay you more benefits in more situations than any other types of definition of total disability.
Some other policies may pay benefits if you are unable to perform the duties of your own occupation and are not working in any other occupations. The most restrictive definition of total disability is the one that only pay benefits if you cannot work in any occupation for which you are reasonably qualified.
Question 3: How long will benefits be payable?
A policy’s benefit period refers to the maximum length of time your policy will pay benefits once you become eligible. A typical benefit period is to age 65. A benefit period to ages 67-70 are also available. A shorter benefit period such as 10 years, 5 years or 2 years are typically also available. Policies with a longer benefit period will have a higher cost.
Question 4: Could my policy be changed, canceled or my premium increased?
Disability insurance policies available on the market are typically either only Guaranteed Renewable or both Non-Cancellable and Guaranteed Renewable. Those that are only Guaranteed Renewable are the ones where premiums can be increased at a later time. Rates are typically cheaper for these types of policies but may actually cost more in the future due to premium hikes by the insurer.
Policies that are both non-cancellable and guaranteed renewable are the ones where premiums may not be increased. Rates are locked in for the entire policy term.
Question 5: Why is it important to consider an insurance company’s ratings?
A disability insurance policy is simply a promise to pay. But a promise is only as good as the company that can honor it. You may have another 10, 20 or 30 years until your retirement.
Economic shifts occur routinely in vicious cycles; insurance companies may come and go during your working career. To ensure that the promise made to you will be upheld by your chosen insurance company, choose a company that is amongst the highest rated. A.M. Best is typically the most recognized third party insurance rating agency. A rating of “A++” is the highest possible rating available. Insurance company ratings are generally stable from year to year but are are subject to change without notice.
You will not be making a bad decision if you choose a company that is rated "A++". The worst decision is not to choose. Choose wisely.
Jack Le, CLU® holds a Financial Representative contract with The Guardian Life Insurance Company of America based out of New York, NY.
The information displayed on this page are the opinions and views of the author, and are not necessarily the opinions and views of The Guardian Life Insurance Company of America (Guardian), or any company that is an affiliate or subsidiary of Guardian.
2017-35654 exp. 2/2019