All insurance policies should be reviewed from time-to-time to ensure that they are still appropriate for your circumstances. The time to do this is BEFORE you need it. We often buy insurance policies, put them in a drawer, and don’t pull them out until we need to use them. Often times, we find that the coverage is out of date and doesn’t do what we need it to do. Disability insurance is no different, but it’s more important that you buy the right kind of disability coverage since some plans may not cover you as you are wanting to be covered. So before you buy a disability plan, look into the types of disability it will insure to make an informed decision on your purchase.
Disability insurance is the only type of coverage that protects your most valuable asset – YOUR INCOME. If you look at your checkbook or bank statement, all the expenses that you have are dependent on your ability to work and earn your income. If you got sick or hurt and couldn’t work, those obligations would be at risk since the bills keep on coming despite your inability to obtain a paycheck. Everyone should have a disability insurance policy to protect their income and their financial obligations.
6 Steps to Reviewing your Disability Insurance:
1. Do you have a personal disability insurance policy, or do you have one through work?
Many people have a long-term disability insurance policy through their employer. These policies, often times, will replace up to 60% of your income. But these types of policies have limitations to them that you can shore up with a supplemental individual disability insurance policy. Some of the downfalls to employer-provided plans are that your claim benefits will be received as taxable income. Also, the policy will not cover all of your income , and who wants to take a 40% pay cut? An employer-provided plan is also not transferrable, meaning when you leave the job it won’t go with you. Furthermore, employer-provided disability coverage will not pay you “own occupation” coverage, meaning benefit payments will stop if you obtain work in another field, even if that field is less income than before.
If you work for yourself, or if your employer doesn’t offer a group LTD plan, then you should buy an individual policy. Even if your employer does provide coverage through work, you should consider buying an individual supplemental disability insurance policy to shore up the shortcomings of the group coverage. Individual disability insurance policies are much more comprehensive than those offered through employers, and have benefits such as protection for your own occupation, tax-free benefits, and the ability to take the coverage with you from job to job.
2. Has your income changed since you bought your original disability insurance policy?
Many times, people buy a disability insurance policy when they first start working, and don’t increase it as their job changes and their income increases. If you bought a disability insurance policy early in your career, it’s likely that there could be provisions in the policy that allow you to increase your coverage as long as your income has increased. But, you have to initiate these changes with the insurance company – it’s not automatic. A good agent can tell you what you should have based on your current income, and work with you to increase your existing coverage based on your current income.
3. Has your job changed since you bought your policy?
If your occupation has changed since you bought your policy, or if it was a number of years ago that you applied for coverage, the rates may be different now. Disability insurance rates are based in a large degree on the duties of your occupation, and some occupations have lower rates the longer you are in the field of employment. For example, if you got your policy as an accountant, but then went on to get your CPA, you could apply for a rate reduction on your policy since you are specialized and have invested more time to your field of employment . This is a situation where reviewing your coverage could save you money!
4. Have you moved since you bought your disability insurance policy?
Some states, like California and Florida, charge a higher rate for coverage. If you bought a policy in either of these states in the past couple years, and have moved to another state, it might be worth seeing if you can replace the coverage and save some money. You have to be a little careful with this, however. If you’re significantly older than when you bought the policy, or if your health isn’t as good as when you bought the coverage, you should probably keep what you already have.
5. Has your health gotten better?
Most of the time, our health doesn’t get better as we get older, but there are some exceptions. If you bought your disability insurance policy and were given an exclusion or an increase in cost due to a pre-existing medical condition, it might be worth seeing if that limitation can be removed if that medical condition is no longer a concern.
We often see this with back pain exclusions. Many times someone will apply for a policy after going to a chiropractor for back pain. Often times, this necessitates an exclusion for any disability related to this pre-existing back treatment. If that person stops having back pain and treatment, it’s likely that the insurance company can review the situation and remove the back pain exclusion, thus giving them coverage for back pain. If you got an exclusion on your policy for something that happened years ago, it’s a good idea to work with an agent to review this and try and have any exclusions removed so more types of injury or illness is covered on your policy.
6. Are there discounts that you may qualify for now?
Disability insurance companies often times offer discounts to particular occupations or demographics. Reviewing your coverage to see if there are any discounts available may save you money. This can involve replacing your existing coverage, so your current age and health needs to be factored in the mix to see if it makes sense to change anything you currently hold in coverage.
Reviewing your disability insurance coverage periodically is very important. While you may not be able to save money in all situations, you will be able to ensure that you have all the coverage you should have given your current state of health.
We have specialists in the area of income protection who are happy to review your current coverage, whether it be through an employer, or a personal policy you bought years ago. They will help you assess your current coverage and make sure it’s still the best value for you.
Request a no-obligation disability insurance quote from us, and one of our experts will reach out to you to discuss your situation.
