Disability Insurance

If you became sick or hurt and couldn't work, how would you pay your bills? How would you maintain your living standard?
 

If you're like most people, your ability to get up each day and earn an income is one of your most valuable assets. Furthermore, your chances of becoming disabled at some time during your working career are probably higher than you would expect. As a matter of fact, the average American faces a one-in-three chance of becoming disabled for 90 days or more before age 65.

Disability insurance can replace a portion of your income when you are unable to work because of injury or illness. There are two major types of disability coverage:

• Short term disability provides an income for the early part of a disability. A policy may pay benefits for two weeks up to two years. Short term disability is often included as part of an employee benefits package.
• Long term disability helps replace income for an extended period of time, usually ending after five years or when the disabled person turns 65. Some people have long term disability insurance provided by their employers; others purchase it individually.

There are two major types of individual long-term disability insurance: noncancelable and guaranteed renewable. (Other less expensive policies with limited, if any, premium or renewability guarantees are also sometimes available.)  In the case of noncancelable or guaranteed renewable policies, the insurer cannot cancel or refuse to renew the policy as long as the required premiums are paid on time. The key difference between the two major types of policies is that under a noncancelable contract, you have extra security that premiums can never be raised above those shown in the policy as long as the required premiums are paid. With a guaranteed renewable policy, the premiums can be raised, but only if the change affects an entire class of policyholders. For this reason, initial premiums for guaranteed renewable policies can be less expensive than noncancelable policies.