January 1, 2010

Q: What features should I look for in a disability insurance policy?

A: The single most important feature is how the policy defines disability. A common definition is "an illness or injury that prevents the insured from doing the substantial and material duties of their own occupation", however some coverage, including social security disability insurance, substitute the term "any occupation". This tiny change makes an enormous difference in the benefit that the policy offers. Other important features are how the policy defines and covers "partial disability" and the treatment of disability resulting from pre-existing medical conditions.

Beyond that, insurance can be customized to fit individual needs and budget by varying standard options like waiting period (we usually suggest 60 days because most people cannot survive financially for more than a few months without earned income) length of coverage (we usually suggest 2 years to best coordinate with social security benefits).  Some people pay extra to have all of the premiums returned in the event that they have no substantial disability claims by the date of retirement.

Finally, consider a policy that uses a simplified issue process and fast underwriting. Some disability insurance companies advertise low rates and attractive features but the majority of applications are not approved. Of course, this just results in wasted effort. A simple issue policy can have the entire process completed within a week without the need for medical records or a personal medical examination.

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