Related Topics:
Choosing the life insurance policy | Product descriptions | Long term care insurance | Critical illness insurance | Annuities | Segregated funds

A number of life insurance companies, in addition to several disability income companies, offer insurance that pays if one cannot work because of disability.

Eligibility for benefit payments is determined by the policy's definition of disability. The policies that provide the broadest coverage define disability as the inability to perform the duties required by one's own occupation. The policies that provide the narrowest coverage define disability as your inability to work in any job at all. Of course, the broader the coverage, the more expensive the policy.

Insurance companies don't sell disability income policies that replace 100 percent of income. Expect to find coverage available for 60 to 70 percent of income as defined in the company's "income chart". Coverage is usually not available to anyone already covered by group insurance. Underwriting is very strict and time consuming. Many applicants do not qualify for standard coverage and may have to accept exclusions and or ratings.

Riders
Riders that can usually be added to a policy's basic coverage are:

CPI cost of living adjustments: This option guarantees that after a year of continuous disability, the benefit amount will increase by a fixed percentage or an amount pegged to the increase in the Consumer Price Index.
Guaranteed insurability: This option allows the insured to buy additional monthly benefits without having to provide evidence of continued good health. It's a way of ensuring that coverage keeps pace with rising income and financial obligations.

What affects the rates?
Benefit period: A policy that pays lifetime benefits will be more expensive than a policy that provides benefits for a limited period of time, such as to age 65, or for 5 years.
Amount of benefit: The greater the benefit, the higher the premium will be.
Waiting period: This is the delay between the onset of disability and the first benefit payment. Waiting periods longer than 30 days will reduce premium costs. Definition of disability - The more restrictive the definition of disability used in the policy, the lower the cost.

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Related Topics:
Choosing the life insurance policy | Product descriptions | Long term care insurance | Critical illness insurance | Annuities | Segregated funds