Unlike many other forms of insurance, disability policies can vary significantly in both price and the level of benefits they provide. When comparing benefits, you can expect the prices to be considerably higher for the better designed policies. However, there are some low cost exceptions to this rule. Therefore, price should not be your number one purchase criteria. Let the policy details, how well they fit your specific needs and the reputation of the company you are dealing with guide your buying decisions. Once you’ve become a well informed consumer, you will be far less likely to spend more than you need to for the level of protection that is right for you.
The Monthly Benefit
The first thing that you need to do is determine how much coverage you need. Do you go for the maximum benefit or can you afford to live on a little less? Don’t assume that your expenses will significantly reduce if you are disabled. Your disability could result in additional costs such as childcare, modifications to your home or nursing services that are not covered by your private or provincial health insurance.
The Waiting Period
Next, you need to determine how long you can go without benefits. This is known as the “Elimination Period” or “Waiting Period” and is the number of days you need to be completely disabled before you are considered eligible for benefit payments. The longer you make your waiting period, the lower your premium. Before making your selection, consider how long you could live off of your current savings. You also need to consider your income flow. As a lawyer, you would likely continue to receive an income for a period of time as a result of work completed just prior to your disability. Most plans offer waiting periods as long as 1 or 2 years, however, most people select 90 or 120 days. Expect to pay a substantial premium for benefits that start after 30 or 60 days.
The Benefit Period
The benefit period is the length of time that benefits will be paid to you once you have become disabled. Comprehensive coverage will pay the monthly benefit, as long as you are disabled, to a normal retirement age of 65 or 71. Some policies will offer shorter benefit periods of 2, 5, or 10 years. These shorter benefit periods allow for lower premium costs, but if you are disabled for a longer period of time, you may run into financial difficulty as your monthly income will end when the benefit period is over, even if you’re still disabled.
Optional Benefits and Riders
Lastly, you’ll have to pick your way through a series of optional features. Some of these riders aren’t cheap and for some individuals, represent poor value. However riders such as Cost of Living benefits and Residual or Partial benefits are very important and should be given serious consideration.