Disability Insurance Articles

When To Consider Lowering Your Disability Insurance Coverage Limits

2010-12-08

Disability insurance protects you when you are unable to work due to an illness or injury. The coverage limits for this type of policy are based on your cost of living, debt and other expenses. When your family or financial circumstances have significantly changed, it is usually worthwhile to reevaluate coverage limits to ensure that they appropriately reflect your potential need.

If you have significantly lowered your monthly or yearly cost of living, you should consider reviewing your disability insurance policy and potentially reducing your coverage limits. Needing less money to pay for rent, food and other expenses means that your coverage limits do not need to be as high as they were when you purchased the policy.

Similarly, if you have reduced your debt, you should review your coverage limits. No longer needing your disability insurance payments to cover as much or any debt can mean that you will require less financial assistance should you become disabled. Provided that you do not anticipate incurring the same amount of debt in the future, you could most likely reduce the amount of your coverage benefits.

Another situation in which you might be able to reduce your disability coverage limits is after you have acquired a large amount of savings. Being able to rely on personal funds should you become disabled means that you will need less financial assistance from the insurance company. Having a full savings account could permit you to lower your coverage limits and still have an adequate safety net.

Familial changes may also warrant a review of your coverage limits. If you are no longer responsible for a family member who you supported at the time you purchased the policy, your need for financial assistance after becoming disabled would be reduced. In this situation you may be able to lower your coverage limits because you would require less money to support your household after you became disabled.

If an individual with an income has joined your household you may also be able to reduce your coverage limits. This additional income may be sufficient to pay for the majority of bills and other expenses after you are disabled. This, too, means that the insurance company would not need to provide you with as much money.

Coverage limits, however, should also be reviewed when the policy's cost has become too expensive. While disability insurance provides a safety net, premium payments should not consume all of your disposable income.

Disability insurance protects against the unexpected, but coverage limits should be proportionate to anticipated need. If your financial or family situation has changed since the policy was purchased the coverage limits may be too high.