Final Thoughts On Disability Income Insurance

Business Uses For Disability Income Insurance

Disability income insurance is also essential for owners of small business, to protect their incomes and their businesses in the event of a disabling illness or injury. Additional protection may be provided through disability coverage specicilly for certain businesses with more than one owner, a disability buy-out-policy will disburse funds for one partner or the business entity to buy a disabled partner’s share of the business. A business owner can protect his business against the loss of income resulting from the disability of a key employee through the purchase of a key employee through the purchase of key person disability insurance.

What Should You Look for in a Disability Insurance Policy

When selecting an individual disability income policy, the following are important coverage areas to check:

Definition of disability – policy definitions can vary. Does the policy define disability as the inability to perform your own job or any job? Select a policy that will pay benefits when you are unable to work in your occupation or one appropriate for your education and experience.

Extent of coverage – Are benefits available for total or partial disability? Are full benefits paid for loss of sight, speech, hearing, or use of limbs, whether or not you are able to work? Does the policy cover both accidents and illness?

Amount of monthly benefit – What percentage of income will the benefit replace? Most insurers limit benefits from all sources to 70% or 80% of net monthly income.

Waiting period – Will benefits begin 30, 60, or 90 days, or even six months, after the onset of the disability? The longer the waiting period, the lower your premiums will be.

Duration of benefits – Are benefits payable for one, two, or five years, to age 65, or for a lifetime? Most people need a benefit period that covers their working years – at least to age 65 or normal retirement age.

Inflation rider – Does the policy offer a cost-of-living adjustment? This important rider should always be considered, for as the cost of living continually increases, you will want your benefit to keep pace with inflation.

Renewability – Is the policy non-cancelable, guaranteed renewable, or conditionally renewable? A non-cancelable policy will continue in force, at the same premiums and benefits, as long as you pay timely premiums, a guaranteed renewable policy will be automatically renewed for an entire class of policyholders, but the premiums may be increased, optionally or conditionally renewable policies are extended each anniversary or premium due date if the company decides to do so.

Waiver of premiums – How long must you be disabled before premiums are waived? Under most polices, you won’t have to pay any more premiums after you have been disabled for 90 days.

Option to buy more coverage – Can coverage be increased without further evidence of insurability?

To ensure adequate protection, analyze your sources of disability income to determine the appropriate insurance for your personal situation. Get the coverage you require before you need it.

-Robert Catalano