Types of Disability Insurance Money Saving Tips, Ideas and Advice to Save Money on Insurance Costs

SavingsNut.com™ – The Best Site On The Internet For Money Saving Tips & Frugal Living Ideas

“A Detailed Guide of Money Saving Advice & Budgeting Know-How On How To Be Frugal & Spend Less”

“The best resource on the Internet to teach both young and old how to reduce everyday household expenses. Simply the best.” TSN

Also Visit

AutoSavingsNut.com

CollegeSavingsNut.com

CreditSavingsNut.com

EnergySavingsNut.com

HealthcareSavingsNut.com

HomeCareSavingsNut.com

HomeFinanceSavingsNut.com

HouseholdSavingsNut.com

InsuranceSavingsNut.com

ShoppingSavingsNut.com

TravelSavingsNut.com

WeddingSavingsNut.com

Thanks for Visiting

Facebook Page

LIFE & DISABILITY INSURANCE - Page 2

Types Of Disability Insurance

The primary function of disability insurance is to replace lost income when someone becomes either partially or totally disabled and cannot work. Disability policies generally only provide coverage until you reach Social Security retirement age (65 or older). Purchasing disability coverage is often ignored, but in many ways it is more important than life insurance coverage. If you are disabled and cannot work, your family has not only lost your income, but they also have the expense of providing for your needs, which may include your spouse staying at home, resulting in the loss of their income also. In addition, unlike when you die at a younger age, if you are disabled, your spouse will not have the opportunity to remarry and secure additional means of support. So, consider your need for disability insurance carefully. The types of policies available include:

1. Short-term disability insurance protects you against loss of income for periods generally up to 13-26 weeks. It may replace all or just a percentage of your income. At the end of the period in effect, payments cease. This type of coverage is meant for individuals where any short-term stoppage of income would pose a severe financial hardship. This type of coverage is generally offered through employer group plans. There are also individual policies available that provide defined cash payments for general disability (i.e., AFLAC), as well as disability caused by certain specific situations, such as being diagnosed with cancer.

2. Long-term disability coverage protects you against loss of income when you are unable to work after the period of short-term disability is over; generally after 26 weeks, or some other specified waiting period. This coverage is generally available to cover a large percentage of your income, but not 100%.

3. Group long-term disability coverage is similar to individually purchased long-term coverage. Because of group efficiencies, it is often less expensive than individual coverage. However, coverage under group policies will normally discontinue once employment ceases with the employer offering group coverage, unless the disability occurred before termination of employment.

4. Social Security disability payments may be available for those that become totally disabled and are unable to perform any work. They generally start after twelve months of disability, and qualification for the disability payments can often be difficult to accomplish. Social Security disability payments are based on a schedule, and are not a percentage of your lost income, as are most disability insurance policies. This coverage is automatic and does not need to be purchased. You will either qualify upon disability or not qualify, depending on the facts surrounding your case.

Factors To Consider When Buying Life & Disability Coverage

Many factors need to be considered when buying life insurance and disability coverage. Some of these factors deal with cost of the insurance, and others deal with the nature of the coverage being purchased. The relative importance of each of these factors to a particular individual varies. Make sure to discuss your needs with your insurance agent and/or financial advisor.

1. Factors to consider when purchasing life insurance.

a. The amount of coverage required. Coverage amounts are available as low as $1,000 to several million dollars. Deciding on the “right” amount of coverage depends on the cost of coverage, your personal needs and situation, and just why you need life insurance. Consider the amount of annual income that would be lost, your current debts and the length of time for which you need to provide financial security. Your stage of life is important. If you are relatively young, your family will probably move on with a new life at some time after your passing, and will make their own way. If you are later in life, you may need to provide for your spouse’s well being for an extended period if you pass away. In any case, do not become “insurance poor” by buying excessive coverage. While large amounts of coverage are a great “investment” if you die young (benefits are paid and premiums stop), for a person with an average life span, insurance is costly. Remember, assuming you are healthy, you can always buy additional coverage at a later date if you feel more coverage is required.

b. The length of term of the insurance coverage. Terms are available for almost any duration, from a few years up to the remainder of your life. Most often life insurance is used to protect against loss of income when death occurs. Therefore, the length of term often coincides closely with expected retirement age. Sometimes terms coincide with the termination of expected expenses, such as when your mortgage is paid off, or your kids have completed college. It’s all a matter of personal needs.

c. The manner in which premium payments are made. With many types of insurance, such as standard term insurance, premium payments will increase based on a pre-determined schedule, due to the increase in age of the insured. Many people like this arrangement because premiums are lower during the early earning years when incomes are also generally lower. With some insurance types, such as level-term insurance, payments will always be the same. This results in payments being larger than standard term during the early years of the policy, but lower than standard term during the latter years of the policy. It’s just a matter of what is best for you. Also, whether premium payments are made annually, quarterly or monthly is another consideration, and may change the cost of coverage.

d. Term insurance or whole life? If your interest is solely in providing insurance coverage, term is the least expensive for a given amount of coverage. If you are considering whole life, or another form of life insurance with an investment feature, you need to consider investment alternatives, in addition to the amount of insurance protection that is required. In other words, do you have better investment alternatives for your investment funds than life insurance? That is the decision you need to make when considering life insurance other than term life.