Long Term Disability Insurance
Any form of disability insurance is aimed at protecting your future earnings. However, many experts agree that long-term disability insurance is without doubt the most important insurance product you can ever purchase. I would hazard a guess this has much to do with the advances that have been made in medical care, and the fact that there are numerous diseases and injuries that cause more of a disabling effect as opposed to a deadly one. This can typically mean that a person can be incapacitated for a lengthy period of time.
The vast majority of long-term disability insurance policies are aimed at replacing anywhere from 50% to 70% of your salary. There are various employers who allow their employees to purchase extra insurance from the same company, and thereby can raise the total amount of their salary that is covered. You should be aware, however, that some long-term disability insurance policies will have a maximum monthly payout, which may reduce the actual percentage of your salary that you will receive.
Whenever you purchase a long-term disability insurance policy your salary limits will be set. Therefore, you may find that in later years you need to increase the value of your plan as your income and salary increases. Some plans will only allow you to increase the value after a physical examination, whereas other plans will allow increases without a physical examination for the first few years of your policy. Therefore, it is important that you understand the exact criteria of your policy.
Long-term disability insurance policies will typically vary in the length of payout. You may find that some policies will only pay out for a period of 5 to 10 years, whereas other policies will pay out until you are aged 65. It is highly recommended that you always choose a policy that will pay out until you are aged 65. You should also be aware that policies from different companies are likely to vary their definition of what a disability is. You may find some policies will include mental illness and back injuries, and many policies may exclude pre-existing medical conditions, or injuries that have been suffered due to dangerous activities.
Most long-term disability insurance policies can either be "guaranteed renewable" or "non-cancellable". A guaranteed renewable long-term disability insurance policy will mean that your insurance company is unable to drop the policy, unless you have skipped or missed premium payments. Non-cancellable will mean that your insurance company is never able to raise the premium on the policy. Both types of policy are great, although non-cancellable is usually far more desirable.
You will generally find that most long-term disability insurance policies will come with additional options or "riders". These are often referred to as residual benefits or cost of living benefits. A residual benefits rider is able to provide the difference between an old and new salary. This will mean that a policyholder will still be protected if they get a new job that doesn't pay the same salary as their previous job. The cost of living rider will allow your policy’s value to increase with inflation.
You also have the opportunity to designate a long-term disability insurance policy as an own occupation policy. The vast majority of long-term disability insurance policies are "any occupation" which will mean that the policyholder must work if they are capable of doing so, even if it is not in the exact same capacity as before. However, an "own occupation" policy will allow a policyholder to continue receiving benefits until they are able to resume their previous occupation. An own occupation policy is far more beneficial to somebody who has a high skill or high-paying job.
Many people never consider purchasing a long-term disability insurance policy, although statistics recently produced by the U.S. Census bureau estimate that there is a 20% chance of becoming disabled. Furthermore, the Council for Disability Awareness (CDA) claim that the average long-term disability absence from work will last approximately 2.5 years. This, of course, is an extremely long time to survive without receiving a steady income.
The most common causes of long-term disability claims are generally musculoskeletal and connective tissue disorders, which include neck and back pain, muscle tendon disorders, joint pain and foot, ankle, and hand disorders. The second-highest ranked reason for claiming on a long-term disability insurance policy is cancer.
As you are no doubt aware becoming disabled is likely to have some serious financial implications. You are likely to lose your ability to work and make a living, and although many people may be able to get by for a few months by spending their savings, there are very few people who can afford to stop working altogether for an extended period of time.
This is exactly where a long-term disability insurance policy can help most people, as they are able to provide an income for a long period of time. Most people have the ability to get this type of insurance through their employers, although there are many insurance companies who will allow you to buy long-term disability insurance on its own.