Disability Insurance Articles
How To Choose Disability Insurance Limits When Starting A Job
2012-01-17
Disability insurance is an important form of protection that every household should consider. The most obvious time to look for insurance is before starting a new job, but when starting a job it can be difficult to decide on insurance limits if the purpose of a policy is to provide income replacement during a disability. Most insurance policies will pay for a percentage of income, which can make it easier to choose limits that will adapt to a policyholder's career changes. Even so, choosing appropriate limits can be confusing.
Most financial advisers recommend that a disability insurance policy cover about 60 percent of the buyer's income, but before shopping for disability insurance buyers should make a list of all monthly bills that will need to be covered during an extended period. It's also a good idea to check with the new employer, as many employers will cover a portion of disability insurance premiums. A few disability insurance quotes will also help when choosing coverage, as this will give an idea of the difference in premiums between plans with different limits. Appropriate insurance limits will vary from one household to the next, but it's easier to make a good decision when all relevant information is gathered in one place.
Another important thing to think about when setting insurance limits is elimination periods, which many buyers don't consider. A policy's elimination period is the amount of time between when a policy holder is disabled and when benefits start. It effectively functions as a deductible. To avoid exhausting savings accounts, a buyer should try to coordinate disability insurance coverage with a realistic elimination period. For instance, if the policy holder can afford to pay for his or her own expenses for about six months, the policy's elimination period should be six months if the insurance limits cover a significant amount of the buyer's income. However, if high disability insurance limits aren't affordable, the policy holder should choose a shorter elimination period to compensate for the smaller benefits. It's helpful to remember that under most policies, the requirements for the elimination period do not need to be fulfilled concurrently.
Policy buyers will need to consider their incomes when starting new jobs and try to save money regularly, as this will make it easier to keep the cost of a disability insurance policy down by choosing longer elimination periods or smaller limits. Another way to save money is to compare different insurance policies before buying and to see how different limits will affect premiums. By keeping premiums low, buyers have more control over their policies and can freely choose superior disability insurance coverage.