When it comes to how to buy a disability insurance policy, there are multiple factors to consider. This is a very technical type of policy that protects your most valuable asset -- your income. For many people, some level of income protection is provided through their job. Those who are self-employed, or want to supplement what their employer provides need to buy an individual disability insurance policy.
Look for the Right Type of Disability Coverage
There are two basic types of coverage that people consider;
Short-term disability insurance policies usually start paying you after you've been out of work for a couple of weeks and continue paying for 3 months. Long-term disability insurance policies start after you've been out of work for 3 months and typically pay until retirement age.
Generally, we recommend self-insuring the short-term risk by accumulating 3 months of cash reserves and then shifting the long-term risk to the insurance company by buying a long-term disability insurance policy.
Start Getting Some Quotes
Most people will start getting quotes from their insurance agent. While this can be a good place to start, it might not be the best option. Disability insurance (DI) is unlike other types of insurance, there are material differences between companies. A life insurance policy has one way to pay a claim, so shopping based on price seems reasonable. When it comes to disability income insurance, shopping based on price alone can lead to getting a policy that doesn't do what you need when you need it the most. In the DI world cheap isn't good, and good isn't cheap.