Disability insurance is insurance coverage that is designed to replace anywhere from 45-60% or more of your gross income in the event of a sickness, illness or injury preventing you from earning an income. The disability benefits are available on a tax-free basis (through most individual disability plans) and are usually provided in an employer’s comprehensive medical benefits insurance plan. Each disability policy, also referred to as SSI insurance, can be very different making it difficult to do a competitive rate comparison.
About 30% of Americans age 35 to 65 will suffer a disability lasting at least 90 days during their careers, according to the Health Insurance Association of America. Unless you have savings that will pay for all of your bills and needs for the length of your disability, insurance is your only way to ensure you have an income. When your disability benefits come from your employer, and not an individual disability plan you will most likely pay taxes on those benefits, making your disability check a lot less than you were expecting.When shopping for individual disability coverage, if you don’t have the insurance benefit offered from an employer, you don’t want to assume that the cheapest rate is the best rate. Your monthly benefit might not be what you are expecting and the odds of getting paid are much lower than with a quality disability plan. You will also need to shop based upon your occupation as some plans are different for each type of job. Blue collar and white collar jobs can have different insurance carriers and disability contracts. These different categories are called risk-classified occupations and can range from an attorney in class 6 to a plumber in class 1.
Another thing to consider is the financial strength of the insurance company that will be paying your disability benefits. This will make a big difference in their ability to pay out claims when you really need them. Check out the disability companies insurance ratings to find out about their strength and weaknesses. Also look for non-cancelable disability insurance contracts. There are three options in your disability policy’s terms:
- Non-cancelable
- Guaranteed renewable policy
- Conditionally renewable policy
If price isn’t an issue, a non-cancelable disability contract is the best choice. It locks in your rates and disability benefits and the insurance company can’t make changes unless you request them whereas with a guaranteed disability policy they can’t drop you but they can raise prices. Be sure to ask specifically for the non-cancelable disability policy as they will try and tell you they are the same. The third option allows them to raise prices and put any kind of condition on the disability policy.