11 Questions to Ask
Before You Purchase Disability Insurance
By June Campbell
It's great to be an entrepreneur, right? There are plenty of "upsides" to being your own boss. But there is a downside. If you are sick or disabled, you can't rely on employee health benefits to carry you through the rough times. How long could you manage without an income if you were unable to work due to sickness or injury? If more than ninety days would be a problem, you have probably already considered purchasing disability insurance.
It's a smart move. Statistics compiled indicate that at age 30, 5 out of 9 people will be disabled for more than 90 days. At age 50, it's 1 out of 3.
When you're shopping for a good policy, take your time and read the fine print. There are a lot of differences between policies and some key issues you should know about before you sign on the dotted line. The following questions to ask are provided by a Licensed Disability Consultant.
1. What is the length of the term? If you have a stroke, for example, are you covered for 36 months or until age 65? For some conditions, 36 months won't be enough.
2. How is disability defined? If you can't work at your stated occupation, are you considered disabled, or will you be expected to get a job serving hamburgers if you are capable?
3. Is there a Partial Disability Option? Diseases like MS or diabetes, for example, often make it possible for you to work sporadically or part time. You don't want to discover that you are disqualified if you are able to work sporadically.
4. Are the premiums guaranteed? If you start smoking or become high risk for disability in some way, can your premiums be raised?
5. Is there a Return of Premium option or some other option that will allow you to recover your payments in 20 years time if you have not used the insurance? Some policies allow premiums to be rolled into an RRSP or something similar.
6. Is there a Cost of Living Rider? A monthly income that seems adequate today may be way too little twenty years from now.
7. If you miss a payment, how much time before your policy is canceled? You don't want to discover that your policy is canceled because your check was tied up in the mail and you are three days late with a payment. Cancellation after thirty days is reasonable.
8. Is your company the First Payer or is there an Integration Clause? That is, if you are unable to work but have some other income, will your insurance policy deduct your other income from the payments (Integration) or will they pay you the full amount (First Payer)? It will make a difference if you believe your disability insurance will augment some other type of income, then discover too late that this will not be how it works.
9. Is your policy portable? If you relocate to another area or country, can your policy go with you?
10. Is there some way you can check to ensure that the company has been solvent for several years? If you purchase insurance with an unstable company, you will lose your premiums and your coverage if they go broke.
11. Are there tax benefits? Your insurance agent or your accountant should be able to provide this information.
One last thing. Be sure to reveal all pertinent information regarding previous health conditions. If you ever file a claim, the insurance company will look into your past medical records. If they find a pre-existing health condition that you did not report, this could mean you get nothing plus you will lose all of your premiums paid to that point
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