The most flexible and reliable source of coverage is an individual disability income insurance policy you purchase on your own. If you are unsure that you need an individual disability policy, complete the following exercise.
Add up all benefits you would receive in case of a disability, including group coverage, government benefits, and other programs mentioned in this section, along with any other monthly income you could count on, such as income from savings, investments or alimony payments.
Now add up all your monthly expenses, including home, car and other debt payments, food, clothing and living expenses, and payments to maintain future needs, such as retirement or your children's education.
If the total income you would receive approaches your expenses, you can assume that you would be able to pay your day-to-day expenses while disabled. If the total income would not be adequate to support you and your family, you may want to consider buying an individual disability income insurance policy to make up the difference. To get a better sense of your disability insurance needs, refer to the Disability Needs Calculator in this section. Better yet, consult with a qualified insurance professional who can conduct a more thorough disability insurance needs analysis and walk you through the myriad of factors you need to consider when contemplating an individual purchase.
When you meet with an insurance professional, here are some of the many questions you'll want to address:
- How is disability defined? Inability to perform your own job? Inability to perform any job?
- Does the policy cover accidents? Illness? Are benefits available for total disability? For partial disability? Only after total disability?
- Are full benefits paid, whether or not you are able to work, for loss of sight? Speech? Hearing? Use of limbs?
- The maximum benefit will replace what percentage of income?
- Is the policy non-cancelable, guaranteed renewable, or conditionally renewable?
- How long must I be disabled before premiums are waived?
- Is there an option to buy additional coverage, without evidence of insurability, at a later date?
- Does the policy offer an inflation adjustment feature? If so, what is the rate of inflation? Is there a maximum?
- What is an adequate level of benefits if you are disabled, in relation to your present and future obligations?
- How long of a waiting period should you select to fit your circumstances until benefits begin?
- How long do you want to receive disability income should it become necessary?
- How much coverage are you eligible for at your present salary?
Lastly, remember to ask your agent or financial advisor to explain anything that is unclear. Ask for a summary of each policy's benefits, which will provide you with an outline of coverage. And once a recommendation has been made, always ask for the insurance company's ratings. A.M. Best Company, Standard & Poor's and Moody's Investor Services are three ratings agencies you may want to turn to check on the financial health of a company with which you may want to do business.