What to Look for in a Disability Insurance Policy – Kiplinger’s Personal Finance

The COVID-19 pandemic has shown how unexpected events can affect one’s well-being and financial stability. You may have friends or family members who were physically and financially impacted by the coronavirus. Or you may have been personally affected. While no one has a crystal ball to predict the future, there are ways you can protect yourself and your family against the unexpected.

It’s likely you have considered how life insurance could protect your family should you unexpectedly pass away. But have you considered what would happen if an illness or injury kept you from earning your usual income? How would you and your family pay monthly bills and maintain your lifestyle? 

You may think you are covered by the disability income protection benefits that many employers offer, such as group short-term and long-term disability insurance. Short-term disability usually pays benefits for a few months if you are unable to work, and when that runs out, long-term disability benefits kick in. What you may not know, however, is that long-term disability insurance typically only pays 40% to 60% of an employee’s base salary to a specified maximum. 

What is income protection insurance?

Income protection insurance, also known as individual disability insurance, pays benefits in addition to long-term disability, which will cover more of your income. Some individual disability insurance policies even cover bonuses, commissions or other incentive compensation not covered by long-term disability insurance. By adding income protection insurance, you’ll receive more benefits, allowing you to continue paying your bills and maintain your lifestyle into the future.

The monthly benefit amount you receive is based on your income at the time you purchase the policy and will begin paying after you meet a benefit waiting period. Benefits will be paid until you recover, or the maximum benefit period is reached, whichever comes first.

When you apply, you’ll choose the benefit waiting period and maximum benefit period that work for you. For example, if you have significant savings, you may feel comfortable choosing a longer benefit waiting period to lower the cost of your policy. While all income protection policies should have these options, not all policies are the same. So, make sure to look for these key policy features to ensure you’re protected when you need it most:

Coverage That Grows with Your Earnings

You’ll want to buy a policy that will allow you to increase your coverage as you earn more money. If you were to purchase a policy today, you’d qualify for a specific monthly benefit that reflects your current income. But what monthly benefit would you expect 10 years from now? For example, if you …….

Source: https://www.kiplinger.com/personal-finance/insurance/604526/what-to-look-for-in-a-disability-insurance-policy

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