Throughout your working lifetime, you are three times more likely to become disabled than you are to die before age 65. Makes a convincing case for having disability insurance, right? Why then is it that people have historically been more likely to buy life insurance, not disability insurance?
The answer is simple: People are confused by disability insurance. There are so many terms to wrestle with that people just throw up their hands and say, ‘I give up. I’m not buying!’
If that sounds like you, read this primer to get up to speed and plot your next move if you’re looking at buying disability insurance.
Know your PDQ
You can visit WhatsMyPDQ.org to assess your ‘personal disability quotient’ (PDQ). This a free service of the Council of Disability Insurance. Your PDQ will predict the likelihood of you needing to use disability insurance during your working lifetime.
Should you buy your own policy or get it through work?
Clark has advised people to buy their own disability insurance policy if they make north of $200,000 a year. If you make less than $200,000 like most average Earthlings, then you want to take the group disability policy through your employer.
Too often people will skip buying disability insurance and think that Social Security disability will help them if needed. Social Security disability won’t help. It doesn’t pay a big benefit and it’s much more difficult to qualify for than a group policy provided through your employer.
Do your background research
Whenever you’re considering buying disability insurance, it’s good to do some background reading on this kind of policy. The Wall Street Journal recommends sites like Disability Insurance Resource Center and Disability Insurance Quotes as good unbiased sources of info. You can also get a quote through these sites too.
Find an insurance agent
Whether you use the sites mentioned above for a quote or you decide to look elsewhere, one this is certain: You’ve got to get more than one quote. Find an insurance agent, preferably one who can give you quotes from multiple providers. Policy Genius and Disability Insurance Services are good starting points to find a broker. Another route is to get a recommendation from a fee-only financial adviser through Garrett Financial Planning Network. Or you can always call an insurer and ask for a local broker.
Buy at 60% of your current pay
Get a disability policy that begins making payments three or six months after you are disabled and continues until age 65. Buy coverage that’s equal to 60% of your current pay before taxes because that will approximate what you’re taking home after taxes.
Be sure the insurer is strong
You only want to consider companies that have been rated ‘A++’ by A.M. Best, which means they are of the highest financial strength.
Make sure your policy covers your specialty
Whether you’re a physical therapist or a construction worker, be sure that the policy your eyeing covers your skill — in case you are unable to perform your specific job duties.
Know if you need high-limit disability insurance
Generally, high-limit disability insurance is limited to the world of sports figures, entertainers, highly compensated business professionals and physicians/surgeons of all stripes. Pro Financial Services (PFS) is one such company that offers these policies through it relationships with underwriters like Chubb, Everest and Lloyd’s of London.
Get a final opinion before signing on the dotted line
Buying disability insurance is an important decision. You’ll probably want another set of eyes on the policy terms to make sure everything is kosher. That’s where a disability claims consultant comes in. They’ll help you make sense of the legalese and make sure it’s in your best interest. Google ‘disability claims consultant’ in your area and pay attention to the reviews, if there are any.
Of course, this is one of those things you hope you never need to draw on. But you’ll be grateful if you have it through your employer because it will protect your loved ones and you as well.