Just like virtually every other insurance policy that you can purchase, disability insurance policies have various options and riders available that you can add to the policy. Those options may be more than just luxuries – they may provide you with the type of complete coverage that you’re really expecting a disability policy to provide you with.
Here are some of the more popular options that are available with disability insurance policies. Some are built into standard disability policies, but others need to be added, often at an additional premium charge.
Guaranteed Renewability
This is often a standard provision in disability insurance policies. It states that your policy will be automatically renewed as long as you make your premium payments. Even though it is a common feature, you should be sure to carefully review your disability insurance policy to make sure that the language is included.
The provision protects you from having your disability policy canceled in the event that you experience negative circumstances, such as a change in your health or in your employment status.
Own Occupation Coverage
Disability insurance policies typically come with one of two provisions, “own occupation” or “any occupation”, which refers to the type of occupation that your disability prevents you from performing. The difference between the two can determine if you will be successful in filing a claim for benefits upon becoming disabled.
If a policy contains an “any occupation” provision, then you will only be able to receive benefits if you are completely disabled. That is to say that you must be incapable of performing any occupation in order to claim benefits. For example, if you are a nurse and you become disabled, you may not be able to collect benefits because you might still be able to work as a librarian.
“Own occupation” coverage is the designation that you want. That means that you will be eligible to receive benefits from your policy as a result of no longer being able to perform in your current occupation only. The definition is much more limited, increasing the likelihood that you will get benefits.
Any occupation coverage is a lot cheaper than own occupation coverage, but that’s because the likelihood of benefit payments is reasonably close to zero with the any occupation definition.
Cost of Living Adjustments
The cost of living is always rising. That means that a policy you purchased 10 years ago, or began collecting benefits under five years ago, may not be sufficient to cover your current expenses.
A cost-of-living adjustment option in your disability policy will tie your benefit payments to the rate of inflation, generally indicated by Consumer Price Index (CPI).
Retirement Protection
Because they are tied to earned income, disability policies typically cut off when you reach the age of retirement. But now that many people are continuing to work past retirement age, and are dependent upon that earned income, disability coverage needs to continue well into the traditional retirement years.
You can sometimes add a rider to your policy that will allow your plan to continue past your normal retirement age. Some may even have a provision that will include making contributions to retirement savings, in addition to providing benefits in the event of a claim.
Elimination Periods and Waiting Periods
Disability insurance policies typically include an elimination or waiting period. This is similar to a deductible in the case of other types of insurance, in that it reduces the cost of benefits to the insurance company in the event of a claim. Disability policies typically have a waiting period anywhere from 60 days to six months. The longer the waiting period is, the lower the premium is on the policy will be.
You have a choice as to how long the waiting period will be, but you have to consider this in light of other resources that you have available to cover your living expenses until the policy benefits become effective.
In choosing the waiting period, consider how much sick time, vacation pay and emergency savings that you have available. If you have enough to cover say, 90 days, then you can be comfortable in setting up the disability policy with a 90 day waiting period.
Future Purchase Options
This is a provision that can be added to a disability insurance policy that enables you to increase your coverage without creating a brand-new policy, or being subject to a medical exam. This is an especially valuable option for young people and for those who foresee higher income in the future. Your disability coverage will increase with your earnings.
You’ll pay extra premium as you increase the coverage, but it’s good to have the option available, since a rising income creates rising living expenses and the need for a higher disability benefit.
Business Overhead Expense Coverage
This can be an excellent option for business owners to add to their disability insurance policies. As a self-employed person, you also have certain business expenses that will need to be paid even if you’re not there to manage the business. And this will be in addition to the monthly benefit that you will need in order to pay for your basic living expense.
Business overhead expense coverage will provide you with an additional benefit to pay those business-related expenses. That could be the difference between keeping your business afloat and being forced to shut it down due to a long-term disability.
Those are just some of the options that are available with disability insurance. If you’re interested in getting a policy, contact us with the form below and we can talk about other options that may be available to you.
