What is the Benefit Period?

The Benefit Period is the maximum period during which a policy will pay benefits for continuous disability. If you choose the option "To Age 65" and are continuously disabled at age 40, you would receive monthly payments for the next 25 years. The Provider Choice disability insurance policy offers several different options to choose from:

• To Age 65 - 75.4% of policies
• To Age 67 - 19.2%
• To Age 70 - 1.5%
• 10 Years - 2.3%
• 5 Years - 1.2%
• 2 Years - .4%

How Do I Know Which Option to Use?

The above data shows the percentage of people who purchased each benefit period this year. As you can see, there is a clear number one choice.

Benefit Period to Age 65

As shown in the table above, 75.4% of policyholders select the “To Age 65” benefit period. It is clearly the most common choice. However, the new “To Age 67” and the "To Age 70" benefit periods have only been around for a few years. Agents have habits just like anybody else, and most agents have been used to selling "To age 65" benefits for decades. We predict that as more people plan for longer careers, longer options will become more popular.

Limited Benefit Periods

Some people do choose to have a limited benefit period. It is much less expensive to own a 2-, 5-, or 10-year benefit period than to own a benefit period to age 65 or beyond. If you plan solely on disability insurance statistics, a 5- or 10-year benefit period would cover the average length of a claim. It is also much riskier because if you were permanently disabled, that would mean getting your last benefit check at 5 or 10 years instead of at your retirement age.

Other people who own a limited-benefit period policy have it because the underwriter limited their benefit period due to medical history, preventing them from getting coverage beyond age 65. It may be because of a history of elevated cholesterol, mental and nervous history, or any other medical history that prevents an underwriter from offering full coverage.

Summary

One never knows if they will ever suffer a long-term disability, or what it is that might cause the disability. If we did, then we would know exactly what type of individual disability insurance policy to purchase. Since we don’t know, my recommendation is always to secure the longest benefit period you can afford. While you would look smart to have a 5-year benefit period policy if your disability lasted only 4.5 years, you wouldn’t look so intelligent if you owned a 5-year benefit period and were permanently disabled.

This material contains the current opinions of the author, but not necessarily those of Guardian or its subsidiaries, and such opinions are subject to change without notice.