A little more on Disability Insurance

How To Choose The Right Individual
Disability Insurance Policy

The four main factors that determine the premium rates of a disability insurance policy are...

1. The amount of coverage
2. The definition of disability
3. The waiting period
4. The benefit period

Let’s discuss each one in detail.


For an even more detailed discussion of disability insurance you can always request my FREE REPORT:

How To Prevent Your Family From Having To Suffer Financial Hardships In Case You Suddenly Become Disabled And Can’t Work!

E-mail me at brad.j.baldwin@gmail.com for your own FREE COPY.


The Amount Of Coverage

Just as most group disability plans usually cover only up to 60% of your income, most individual disability plans also cover you for only the same amount (with a few policies cover up to 80%). As you can probably guess, the higher the amount of coverage, the higher the premiums.

What percentage of your income you want your disability policy to protect depends on your financial position.

For example, if you have an investment portfolio or passive income, like rental properties, or both, that can cover a large portion of your living expenses if you’re disabled, then you probably don’t need to buy the maximum amount offered by your insurance company.

On the other hand, if you have little or no life savings or investments, then you probably want to buy as much coverage as you can afford. (In a few moments, you’ll learn how to calculate the approximate amount of disability insurance you should buy for your individual situation.)

The Definition Of Disability

A disability policy can either be an own-occupation (own-occ) or an any-occupation (any-occ).

An own-occupation (own-occ) disability policy provides benefits if you can’t do the work you normally do, whether that’s medical, plumbing, carpentry, dentistry, nursing, and so on.

An any-occupation (any-occ) disability policy provides payments if you can’t do the work for which your education and training suit you.

An own-occ policy costs more than an any-occ policy for the same amount of coverage. This is because your insurance company has a higher chance of paying benefits to you under an own-occ policy than an any-occ policy.

Let’s face it, in some cases, even if you become disabled and can’t do your regular occupation, you may still be able to do another type of work.

For example, a surgeon who injured his or her hands might not be able to operate anymore, but he or she may be able to teach medicine at a college or to become an administrator at a hospital.

Under an own-occ policy, this person could work in such a job to receive a full salary as well as collect disability benefits at the same time, making even more income than his old one.

On the other hand, under an any-occ policy, this person is required to accept the teaching job, the hospital administration job, or another job that he or she is qualified for. In other words, unlike own-occ policies, any-occ policies don’t let you collect a full-time salary plus also full benefit payments.

Most people buy any-occ policies because they’re much less expensive than own-occ policies. Which one you buy depends on your financial position and preference.

For instance, if you can afford to pay the premiums for an own-occ policy, and also don’t want to do any other type of work except your present occupation, then this is the one to buy.

Conversely, if you can’t afford (or don’t want to pay) the premiums of an own-occ policy or if you don’t mind working in a different occupation if you can’t do your current job any more, then an any-occ policy is the one to buy.

I have a warning for you...

If you come across a policy that says something like this… “disability means total and continuous disability that will prevent the insured (policyholder) from performing any duty pertaining to any business or occupation,” avoid it at all costs. This type of policy basically denies you (and almost every policyholder) of benefits.


Remember an even more detailed discussion about disability insurance, the ins and outs of the product can be found in my FREE REPORT:

How To Prevent Your Family From Having To Suffer Financial Hardships In Case You Suddenly Become Disabled And Can’t Work!

Just send me a request for my FREE REPORT at brad.j.baldwin@gmail.com


The Waiting Period

As you’ve learned earlier, with every disability policy, you receive benefit payments only after you’ve served the waiting period. For short-term benefits, this is usually a week. And, for long-term benefits, it’s usually three months.

The longer your waiting period is, the less you pay in premiums. So, when buying a long-term disability policy, you may want to choose a six- month or one-year (or even two-year) waiting period instead of the normal three months, if your financial situation allows you to do so.

For instance, if you have enough emergency funds or savings to pay for six months of living expenses, then choose a six-month waiting period.

The Benefit Period

This is how long you’ll receive monthly benefits once your policy starts paying. The period can range from several months to life, depending on what you choose and also on what your insurance company is willing to offer you.

Unlike the waiting period, the longer the maximum benefit period, the higher the cost of the policy.

Again, which period you choose depends on your financial situation.

For example, if you have lots of assets, such as stocks, bonds, real estates, and know you’ll be able to generate enough income from them in ten years to support you and your family for the rest of your life, then you may choose a ten-year benefit period.

On the other hand, if you think you’ll need financial support for life should you become totally disabled, then you may choose a lifetime benefit period, covering you for as long as you live.

(Please note: If you’ve been working for at least twenty-years, then the money you receive from Social Security at age 65 may be enough to support you. If so, then you may consider a benefit period of up to age 65 only.)

Okay, so now you know a little bit more about Disability Insurance.