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Published On: Tue, Aug 19th, 2014

The Most Important Questions to Ask Before Purchasing a Disability Insurance Policy

Given that as many as 25 percent of all adults are likely to become at least partially disabled at some point in their working lives, there is a compelling reason to purchase disability insurance coverage — especially when you consider that more than half of all Americans do not have enough savings to cover their expenses in the event of a prolonged absence from work. A disability, whether due to an injury or illness, can be financially devastating unless you take precautions.

The problem is that many people who purchase disability coverage don’t do their homework before signing on the dotted line. They simply accept their employer’s policies, which while affordable, may not completely meet their needs. Even those who purchase coverage independently may focus more on the premium cost, and less on the factors that will determine whether they will actually receive any of their benefits.

Before you purchase a disability insurance policy, ask a few important questions. Otherwise, you could find yourself fighting the insurance company to get what you deserve, instead of focusing on managing your disability.

Vital Inquiry #1: What is the Company’s Reputation?

When it comes to paying claims, not all companies are created equal. We’ve all heard stories — justified or not — about insurance carriers that drag their feet when processing claims, seem to deny all claims out of hand and generally do everything they can to avoid paying out to policyholders.

Before you purchase a policy, research the company. What is their reputation? A number of organizations, including state insurance bureaus, offer company rankings to help consumers make informed choices. Search for lawsuits filed against specific companies in your state; you can find information about what kinds of suits are filed against insurers by searching for Michigan disability attorneys and reviewing their websites. Remember, a lawsuit against an insurer does not mean you shouldn’t purchase a policy, but that you should proceed with caution and understand all of the terms.

photo supplied, courtesy of guest blogging network

photo supplied, courtesy of guest blogging network

Vital Inquiry #2: What Riders are Available on the Policy?

Riders are optional features to a policy that come with additional costs. However, they can make a significant difference in how well your policy meets your needs should you become disabled. Some common riders include cost of living, which keeps disability payments in line with the current cost of living; non-cancellation, which prevents the company from cancelling your policy; a future purchase option, which allows you to purchase more coverage later and riders for specific disabilities or occupations. Explore these options to ensure you have adequate coverage and to avoid surprises.

Vital Question #3: What Restrictions are on the Policy?

Unlike health insurers, who cannot deny coverage based on pre-existing conditions, disability insurance carriers are not required to pay benefits for pre-existing conditions that take you out of work. Not all carriers have pre-existing condition clauses, but it’s important to know if yours does before making a purchase.

Also, make sure you understand any other policy restrictions, such as exclusions (situations in which the company won’t pay a claim), waiting periods, disability definitions and whether you need to be totally disabled before making a claim. You should also determine how long the policy pays benefits. Some only pay out for a certain number of years, while others pay to age 65, 66 or 67, which could make a significant difference in your overall payout.

Vital Question #4: What Is My Occupational Classification?

Your insurance premium is determined by the type of work you do — the more dangerous your job, the more likely you are to be disabled and therefore the higher the premium. If you change careers, you may need to apply for a reclassification, so it’s important to know how the carrier views your occupation.

It’s also important to understand whether your policy has an “own occupation” provision. Ideally, your policy will pay benefits if you become disabled from your own occupation; however, some policies will only pay benefits if you are disabled from all work in general. Being clear on this distinction is very important, as it could mean the difference between getting the benefits you paid for and having to take a different job just to make ends meet.

As you compare your disability policy options and ask questions, be sure that you get all policy details in writing, and review all documents before you sign. That way, should a problem arise in the future, you’ll have the evidence you need to get your claim paid, or to file a bad faith lawsuit against the carrier. It’s up to you to protect your investment in disability insurance, so do your diligence and get the protection you need.

On the DISPATCH: Headlines  Local  Opinion

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