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What Should I Know Before Purchasing Individual Disability Insurance?

umbrella over money - Purchasing Individual Disability Insurance

Life’s uncertainties, especially the potential impact of a disability, underscore the importance of securing your income.  Purchasing individual disability insurance can be a crucial aspect of financial planning for your future.  This type of insurance serves as a financial safety net, offering protection and peace of mind in the face of unexpected events that could compromise your ability to earn a living.

This article aims to provide clear insights into essential considerations before you commit to individual disability insurance.  We’ll break down the critical factors to help you make informed decisions and give you a practical understanding to guide you through the process, ensuring your choice aligns with your specific needs and provides robust financial protection in the face of unexpected setbacks.


Why Should I Buy My Own Disability Insurance Coverage?

fine print for individual disability insurance coverage

Buying your own disability insurance coverage is important for several reasons:

  • Income Protection: Disability insurance replaces a portion of your income if you become unable to work due to a covered illness or injury.  This ensures that you can continue to meet your financial obligations, such as mortgage payments, bills, and living expenses, even if you are unable to work.

  • Employer Coverage Limitations: While some employers offer disability insurance as part of their benefits package, the coverage provided may be limited.  For example, the coverage may be limited to a low percentage of your income, or the coverage could contain illness-specific limitations that do not make sense for your individual situation. It is important to review the terms and conditions of employer-sponsored disability insurance to understand the extent of coverage.  Additionally, employer-provided coverage may likely end if you leave your job.

  • Portability: If you have an individual disability insurance policy, it is typically portable, meaning you can take it with you even if you change jobs or careers.  This provides continuity of coverage, especially if you develop a health condition that might make it difficult to obtain new coverage later on.

  • Customization: Individual disability insurance policies often allow for more customization.  You can choose the benefit amount, waiting period (the time before benefits kick in), and the length of coverage.  This allows you to tailor the policy to your specific needs and financial situation.

  • Supplementing Group Coverage: If you have group disability insurance through your employer, it might not be sufficient to cover all your needs.  Purchasing an individual disability insurance policy can provide additional coverage to supplement what you already have.

  • Protecting Your Investments and Assets: Disability insurance helps protect your financial future by providing income when you can’t work.  This can be especially crucial if you have significant financial commitments, such as a mortgage or investments, that need to be sustained even if you’re unable to earn a salary.

  • Coverage for Self-Employed Individuals: If you’re self-employed, you won’t have access to employer-sponsored disability insurance.  Purchasing your own policy becomes even more critical in this situation, as your income may be essential for both personal and business expenses. Attorneys, accountants, and doctors frequently find that individual disability insurance makes sense for their situation.

  • Peace of Mind: Having disability insurance can provide peace of mind, knowing that you have a financial safety net in case of unexpected circumstances.  This can reduce stress and allow you to focus on your recovery without worrying about the financial impact of a disability.


How Do I Purchase Disability Insurance?

insurance quote for individual disability insurance

Purchasing disability insurance involves several steps.  Here’s a general guide to help you navigate the process:

  • Assess Your Needs: Determine the amount of coverage you need.  Consider your monthly living expenses, debts, and financial obligations.  Also, think about how long you could manage without your regular income.

  • Understand Policy Types: Learn about the different types of disability insurance policies, such as short term disability (“STD”) and long term disability (“LTD”).  Understand the waiting period (also known as elimination period), benefit period, and any exclusions or limitations.

  • Contact an Insurance Professional: If you’re unsure about the process or need assistance in selecting the right policy, consider consulting with an insurance professional, such as a broker or agent, or financial advisor.  They can provide guidance based on your specific needs and circumstances.

  • Get Quotes: Contact insurance providers or use online tools to get disability insurance quotes.  Provide accurate information about your age, occupation, health, and other relevant details to receive accurate quotes.

  • Compare Policies: Compare the quotes and policies from different providers.  Pay attention to coverage limits, waiting periods, benefit amounts, and any optional riders that may be available.  Consider the overall value and flexibility of the policy.

  • Review Policy Details: Carefully review the terms and conditions of the policy you’re considering.  Understand the definitions of disability, the claims process, and any exclusions.  Ask the insurance provider for clarification on any points you find unclear.

  • Consider Optional Riders: Some policies offer optional riders that provide additional coverage. Common riders include cost-of-living adjustments (“COLA”), residual or partial disability benefits, and future purchase options.  Evaluate whether these riders align with your needs.

  • Submit an Application: Once you’ve chosen a policy, complete the application process.  You may need to provide information about your health, medical history, and lifestyle.  Be truthful and accurate in your responses, as this information will impact the underwriting process.

  • Underwriting Process: The insurance company will review your application and may request additional information, such as medical records or a medical examination.  The underwriting process helps the insurer assess the risk and determine your premium.

  • Receive Policy and Pay Premiums: If your application is approved, you will receive your disability insurance policy.  Review it carefully to ensure it meets your expectations.  Pay the premiums on time to keep the policy in force.

Remember that the cost of disability insurance is influenced by factors such as age, health, occupation, and coverage amount.  It’s important to make an informed decision based on your individual needs and financial situation.


What Insurance Company Provides the Best Disability Insurance Policy?

disability insurance company buildings

Determining the “best” disability insurance company can be subjective, as it depends on individual needs, preferences, and specific circumstances.  Different insurers may excel in various aspects, such as customer service, policy options, pricing, and financial stability.  It’s crucial to carefully evaluate each company based on your unique requirements.

More important than the specific insurance provider will be the terms of the actual policy.  Additionally, it may be beneficial to consult with a financial advisor or insurance professional to help you navigate the options and choose a policy that aligns with your specific needs and goals.  Keep in mind that individual experiences with insurance companies can vary, so it’s crucial to conduct thorough research and make an informed decision based on your unique situation.


What Factors Should I Consider When Purchasing Individual Disability Insurance?

When purchasing individual disability insurance, it’s crucial to carefully consider several key factors to ensure that the policy meets your specific needs and provides adequate protection.  Here are the factors you should consider:

  • Definition of Disability: Pay close attention to how the insurance policy defines “disability.” Different policies may use different definitions, such as “own occupation” or “any occupation.” An own occupation definition is generally more favorable, as it considers you disabled if you can’t perform the duties of your own occupation, even if you could work in a different capacity.

  • Benefit Maximum Periods: The benefit period is the length of time that the insurance company will pay disability benefits.  Common options include short term disability (“STD”) and long term disability (“LTD”).  STD typically covers the initial weeks or months of disability, while LTD provides coverage for an extended period.  Most policies provide that the LTD benefits will pay out until retirement age, though it is possible to purchase a policy that includes a lifetime benefit.  Choose a benefit period that aligns with your financial needs and expectations for the duration of a potential disability.

  • Residual Benefits: Residual or partial disability benefits come into play if you can work but are earning less due to a disability.  This feature allows you to receive a portion of the disability benefit if your income is reduced.  Carefully review the terms and conditions for residual benefits, including the threshold for eligibility and how benefits are calculated.

  • Cost of Living Adjustments (“COLA”): COLA is an important feature that helps protect your disability benefits from the impact of inflation.  With COLA, your disability benefits increase over time to keep pace with the rising cost of living.  While this feature can enhance the value of your policy, it may also affect the initial premium cost.  Consider your long-term financial goals and the potential impact of inflation when deciding whether to include COLA in your policy.

  • Elimination Period (Waiting Period): The elimination period, also known as the waiting period, is the amount of time you must wait after becoming disabled before you start receiving benefits.  Common elimination periods range from 30 to 180 days.  Choosing a longer elimination period can lower your premium but means you’ll have to cover your expenses during that waiting period.

  • Benefit Amount: Determine the monthly benefit amount you need to cover your essential living expenses and financial obligations.  Some policies allow you to insure a percentage of your income, while others offer a fixed benefit amount.  Ensure that the benefit amount aligns with your financial needs in the event of a disability.

  • Policy Exclusions and Limitations: Carefully review any exclusions or limitations in the policy.  Some policies may exclude pre-existing conditions or specific types of injuries or illnesses.  Understanding these limitations is crucial to avoid surprises when filing a claim.

  • Renewability and Non-Cancelable Features: Look for policies with guaranteed renewability and non-cancelable features.  Guaranteed renewability ensures that the insurance company cannot cancel your policy as long as you pay your premiums, and non-cancelable means that the terms of the policy, including premium rates, cannot be changed by the insurer.

  • Riders and Optional Coverages: Explore any additional riders or optional coverages offered by the insurance company.  Riders can provide extra features, such as future purchase options, which allow you to increase coverage without additional medical underwriting.

Before finalizing your decision, consider consulting with a qualified insurance professional or financial advisor who can help you understand the nuances of different policies and guide you in selecting the most appropriate individual disability insurance for your specific situation.


How Can The Maddox Firm Help Me With My Disability Claim?

The Maddox Firm has helped hundreds of individuals successfully file, appeal, or litigate their short or long term disability claims.  Our experienced team understands the nuances of insurance policies, including private policies, and the best strategies to increase your chances of a successful outcome.

Here are a few ways The Maddox Firm can help you with your disability claim:

  • We Examine Your Policy and Assess Your Claim: The Maddox Firm will examine your disability insurance policy to determine the eligibility criteria and any potential roadblocks for your claim.  We assess your policy, medical records, and other information to evaluate the strength of your disability claim.  This allows us to formulate a personalized strategy to secure your benefits.

  • We Handle All Communications with Your Insurance Company: Once retained, The Maddox Firm will handle all communication with your insurance company on your behalf.  This includes submitting and following up on requested documentation, answering any requests for additional information, and ensuring that your rights are protected throughout the process.

  • We Help You Obtain Evidence to Support Your Claim:  The Maddox Firm understands what medical and vocational evidence can be used to support your claim for benefits.  We’ll request and review your existing medical records, obtain supplemental statements from your doctors, communicate with your employer for any needed documentation, and refer you for additional testing with trusted professionals as needed.

  • We Handle Appeals and Litigation: If your disability claim is denied, The Maddox Firm can assist in filing an appeal.  We can also represent you in litigation with your insurance company.  Our team is experienced in handling disputes related to benefit denials, and we can advocate for your rights to your insurance company -- and in court if the need arises.

Whether you are looking for assistance in navigating the claims process, appealing a claim denial, or litigating a final adverse decision, The Maddox Firm can help with your short or long term disability claim.  The experienced team at The Maddox Firm will examine your insurance policy, correspondence from your insurance company, medical records, and any other relevant documentation in order to give you personalized guidance on how we can help you win your short and/or long term disability claim.





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