Disability Insurance Is More Important Than You Think

As a young entrepreneur, I was doing well. I owned my own business, lived in a beautiful home, drove a luxury car and was in excellent health. I worked out several times a week and was fit as a fiddle. I never smoked, never had high blood pressure and never took prescriptions. The thought of being

In a split second life can change, and everything you've worked so hard to accomplish can be gone. Think about your own life for a moment. Even though you're healthy today, what would happen to you and your family if tomorrow you suddenly were unable to work? How would you pay your bills? Who would support your family? What would happen to your business?

While most people, especially entrepreneurs and business owners, don't want to even think about the possibility of a setback, the fact is that we are all vulnerable. The only thing that kept me afloat financially throughout my five-year recovery was the disability insurance I had secured for myself. So even if you think you might never need disability insurance, think again.

Before you rush out and buy just any policy, realize that not all plans are the same. As you investigate various disability insurance policies, keep the following considerations in mind.

Compare Definitions Vs. Rates

Every disability insurance policy is different, and this is not a product where you want to simply shop for the most competitive rates. Buying the cheapest policy is like throwing your money away. Your chances of being paid a benefit under a cheap contract are much lower than you receiving benefits from a quality contract. Know the exact language of the definition of "disability." Does the policy use the words "own occupation," or "any occupation" to define the definition of disability? There's a big difference between the two phrases.

For example, depending on the carrier and the wording of the contract, if you typically work at a desk doing computer or paper work, and you became paralyzed from the waist down, you could still do your job and would not be considered "disabled." However, if you were a Broadway dancer and you became paralyzed, you would be disabled from your job. Know what you're buying.

Know Your Time Limits

Aside from policy definitions, two other factors determine your rate, and both involve time limits. Your first involves how soon you want payments to begin after you become disabled. The options are 30, 60 or 90 days. Base your decision on how much savings you have set aside. If you were to become disabled, how long could you survive on your savings until insurance kicked in? The other time factor is how long you want to receive payments. The options are usually five years, untill age 65 or lifetime. If yours is the only income coming into the family, you'll probably want benefits for longer than five years. Choose the time span that makes sense for your lifestyle and situation.