Disability Insurance Articles

How To Balance A Budget With Disability Insurance Premiums

2010-07-17

Disability insurance is a responsible buy and a very important type of insurance coverage for many people, but sometimes, it can be difficult to budget premiums. This is particularly true for older buyers. Budgeting is very important, because the entire purpose of disability insurance is to keep your finances intact when you're unable to work--if you allow the policy to lapse due to high premiums, the purpose of the policy is somewhat defeated, and you'll simply end up wasting money. It's therefore important to budget before you ever decide to buy a disability insurance policy.

The first logical step is to make sure that you're paying as little for your policy's premiums as possible. Look online to compare premiums before buying a policy, or, if you already have a policy, check your rate against your insurance provider's competitors. Unlike some other forms of insurance, disability insurance can usually be quickly canceled without major repercussions, so if you find a better rate, talk to your insurance agent immediately. Try to get him to match or beat the rate that you found. Be sure that you're comparing quotes for the same amount of coverage, and the same state of coverage (as disability insurance quotes can vary from one state to the next due to insurance law).

You should also ask your insurance agent for tips to help you decrease your premiums. Many insurers will offer preferential rates to healthy workers, so you may have a significant financial incentive to improve your healthy. Make sure that your coverage levels are appropriate. You'll pay far more for coverage if you're buying excessive amounts of it--you should only buy enough to cover your monthly costs if you become disabled. The point is to cover living expenses, not to make it seem like you've won the lottery. On the other hand, you won't want to buy too little coverage, so look at your average budget. Take that amount and add about 20% to your coverage to cover potential additional expenses.

Once you're sure that your policy is appropriate and your premiums are limited, you can easily budget premiums. Consider cutting areas of discretionary spending to make room for the new premiums, if necessary. Use an online financial planning service or an in-person financial planner to keep track of your budget each month. Be sure to reevaluate your budget every few months and adjust it to new or reduced living expenses. You'll stand a much better chance of keeping your disability insurance coverage if you budget premiums early and stick with your plan.