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Disabling Long-Term Disability

Tuesday, May 4th, 2010

The likelihood of contracting a Long Term Disability always seems bleak. The truth however is quite different. In fact, according to the US Census Bureau, disability is imminent for one in five of us! Disability that could be induced by Cancer, or back, neck, joint & tendon related complications and any such ailment that renders us incapable of holding our jobs for periods ranging from 6 months to 3 years. To go that long without regular income is hard; and to ignore the possibility of disability in the first place; foolhardy.

While we can not always prevent Disability; we can guard against its outcome to a large extent by investment in a good Long Term Disability Insurance program. Experts contend that this is the most important insurance type one can purchase. Depending on the kind of insurance bought, one can be compensated to the tune of 60-70% of one’s salary. This payout can be increased to a healthy 80% if your employer allows you to purchase additional insurance.

There are some basics that one must take into account when deciding a fitting Long Term Disability Insurance. They are:

* Salary is set at the time of Policy Purchase. As your salary increases, increase the value of the plan
* Policy with or without mandatory Physical Examination
* Payout Periods vary. It might be better to opt for late payout (until age 65) as against 5-10 years
* Disability Definition differs between insurers. Take a studied and suitable plan
* Insurance Type varies. ‘Guaranteed Renewable’ ensures that the company can not drop the plan (unless premium payment is defaulted). ‘Non-Cancelable’ type prevents the insurer from raising Premium

These and many more factors need to be specifically scrutinized. Would it suit your needs better to have a ‘residual benefits’ policy (where insurer compensates for incremental difference between old & new remuneration), or buy a ‘cost of living’ policy (where insurer takes inflation into account).

There are many things to consider for a tailor-made insurance plan, best done by engaging a trusted financial advisor (or company). With the perfect Disability Insurance, you have the power to ‘disable’ many of the worst effects of ‘disability’.