1. First of all, what is a disability insurance?
The idea of disability insurance is simple: It provides you with an income in the event you become disabled and can no longer work like you did before.
If you are currently employed full-time, chances are you may already be covered, or have the choice to opt into a short-term and/or long-term disability insurance as part of your employment benefit, though it may or may not be as comprehensive as you'd like.
If you are starting your own business, or if you are working as a solo professional such as a physician, tradesman, dentist, designer, lawyer, you may want to consider getting a disability insurance plan. One of the first things you should look into is:
2. Should you get coverage for disability by illness, disability by accident, or both?
Generally, an insurance policy that only covers disability by accident is easier to get, but it is more comprehensive to get a disability insurance policy that covers both disability by illness and disability by accident. You will have to undergo medical testing and provide your medical history as part of the application.
3. How long is the insurance benefit period if you become disabled?
There are disability insurance plans that only provides coverage for several years in the event you become disabled, until you are 55–70 years old, or for life (less common).
If you were disabled for the longer term while only having a disability insurance plan that provides coverage for 2 years for example, then you will only receive the disability benefit for 2 years, and then you'd be on your own.
A disability insurance plan that provides coverage up to age 55–70 would provide the disability benefit in the event you are disabled until you reach 55–70 years old.
A disability insurance plan that provides coverage for life is less common, and is usually provided as an add-on option to an existing time-limited disability insurance plan.
4. What insurance riders should you get?
An insurance rider is an optional coverage containing additional terms to include in your insurance policy.
To put it simply, a rider lets you "customize" your insurance plan so you get "add-on" benefits. Below are some common riders you can consider when getting a disability insurance plan.
5. The "Own Occupation" Rider
Say you are a surgeon and you get a long-term hand injury, and thus are no longer able to perform surgery.
If you do not have an "Own Occupation" rider on your disability insurance plan, you might not be able to get the disability benefit because you could still work as a cashier at McDonald's.
However, if you have the "Own Occupation" rider, you should be eligible for the disability benefit because you can no longer work in the occupation you are otherwise qualified for due to the disability.
6. The "Partial Disability" Rider
A disability can be partial, and in the context of an occupation, it means you may still be able to perform some of your job duties, but not all due to the partial disability. The "Partial Disability" rider takes this into account and may provide you with partial disability benefits if you were to find yourself in this situation.
7. The "Future Income Option" Rider
Say you make a monthly income of $5,000 today and you want to protect that amount of income with a disability insurance plan.
$5,000 is enough for yourself, for now.
But what about when your income goes up, and you decide to get a mortgage? What about when you have a (growing) family? You might decide that you want to protect more of your income, say $7,500 or $10,000.
This is where the "Future Income Option" rider comes in handy. It allows you to increase the amount of income you want to protect either annually, or after a certain number of years.
8. The "Cost of Living Adjustment" Rider
Say you were to sign a disability insurance policy at 2023 to protect a monthly income of $5,000, and you were disabled in 2040.
You may get the disability benefit of $5,000 a month in 2040, and if you have a 3% "Cost of Living Adjustment" rider, you may get $5,150 a month in 2041 because the benefit accounts for the rise in cost of living every year. It does not account directly for inflation, but rather a certain set percentage defined by your insurance provider.
9. The "Return on Premium" Rider
If you have a disability insurance plan, you'd have to pay into it monthly or annually. A "Return on Premium" rider pays you back some of the premium you have paid into the plan if no claims are made after a certain number of years. Keep in mind though, that this rider can be costly relative to the premium you are already paying.
Over and Out
You never know what could happen in life. Disability insurance provides a greater peace of mind, and it could protect you financially in the event you were disabled.
The information provided in this post is introductory in nature, and is only meant to provide you with a headstart so you have a better idea on how to look for a suitable disability insurance plan. There are certainly many other riders you can get depending on your insurance broker. Happy searching, and hope this post helps!