Long term Disability |
| Long-term disability |
| Long-term disability - Some experts contend that long-term disability insurance is the most important insurance you can purchase. This can be partially attributed to advances in medical care; some diseases and injuries are now disabling rather than deadly, meaning that the incapacitation can be lengthy. |
| Typically, long-term disability insurance can be purchased to replace 50-70% of salary. Some employers allow employees to purchase extra insurance from the same company, sometimes raising the total to 80%. Note, however, that some policies have monthly maximum payouts, which may reduce the actual percentage of salary the policy owner receives. The "salary" is set at the time the policy is purchased, and you will likely want to increase the value of the plan as your compensation increases. Some plans only allow increases with a physical, some allow increases without a physical for the first few years of the plan, and some have other rules; check the plan for its particulars. |
| Long-term disability policies vary in the length of payout: some policies will only pay out for 5 or 10 years, some will pay out until age 65. Experts recommend the latter. Policies also vary in definition of disability (some contentious categories include mental illness and back injuries) and exclusionary criteria (pre-existing medical conditions, injuries from dangerous activities, etc.). |
| Policies can be 'guaranteed renewable' and 'non-cancelable.' Guaranteed renewable means the insurance company cannot drop the policy, unless premium payments are skipped. Non-cancelable means the insurance company can never raise the premium on the policy. Both are desirable, but non-cancelable is usually best. |
| There are a few important policy options (or "riders") that should be considered: "residual benefits" and "cost of living" (COLA). The residual benefits rider provides the difference between old and new salaries, in the event that the policy owner can get a new job, but not one with the same salary as his old one. The cost of living rider allows the policy's value to increase with inflation. |
| A disability policy can be designated as an "own-occupation" policy. Most policies are "any-occupation," which means the policy owner must work when he is capable, even if not in the same capacity as before. An "own-occupation" policy will allow the owner to collect benefits until he can resume the previous occupation. Typically, these policies are more beneficial to policy-owners with high-skill or high-paying jobs. |
| Social Security - Social Security is not a replacement or surrogate for disability insurance; at the most, it should be a last resort for those who can't get private coverage. Not everyone is eligible for Social Security benefits, even once disabled - the applicant must have significant work history, must have been unable to work for a year or more, and must not be able to work in any capacity. |
| Long-term Care |