Disability insurance rates are dependent on many different components. The inexpensive policies available are typically the ones that pay out fewer benefits in fewer situations. These policies may actually cost you more because of benefits not paid due to restrictive terms and provisions. Before you make a decision on a policy, there are five primary questions that you need answers to.
Question 1: How much coverage may I qualify for?
You can typically be approved for about 60% of your taxable earned income. Rates will be higher for policies that have larger monthly benefit amounts. The higher your income is, the lower that percentage is going to be. Somebody making $50,000 needs the full 60% to maintain their standard of living, somebody making $500,000 is not going to get very close to 60%.
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 work doing something else while you are disabled from your regular occupation.
These definitions are of the most comprehensive 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 type 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 pays benefits if you cannot work in any occupation for which you are reasonably qualified.