When Is the Best Time To Get Disability
Insurance Or, To Discontinue It?
LARRY SCHNEIDER
Disability Income Insurance Specialist
T
he best time to get a
disability insurance income
protection policy – or any
other form of coverage – is to
get it immediately just prior to a
disability! Seriously, even though
that is not an inaccurate answer,
the best time to get coverage is at
the earliest possible moment when
it is both financially feasible and
practical, even though there may
not be an obvious need now.
The only result from
procrastination can be that health
can change, circumstances can
change etc., all of which can affect
eligibility. Why then do too many
bread winners wait until it is too
late? Statistics will point out, that
one out of every four workers will
get disabled for a period before
they reach age 65.
Some reasons might be that
prospects and even agents or
advisors don’t see the need or
the urgency – for their clients or
even themselves – for this form
of protection. Another reason
might be that no one has told
them they should have an income
protection policy or that this form
of protection even existed, or
that they thought they were
uninsurable. They could also
have some false belief, that they
will never get disabled and even
if they did, that their employer,
or someone else will pay their
expenses/wages.
Incidentally, and for
everyone’s information, one
does not have to become a
‘paraplegic’ in order to collect
the monthly benefit. Definitions
for total disability which will
then trigger the payout do vary,
but the best one out of several
variations will say, “unable to
do the material duties of YOUR
OCCUPATION.” Even though
you ARE working elsewhere and
regardless of how much you
earn.
What happens if someone
wants the income protection
coverage, but has already been
turned down for any number of
reasons and not necessarily due
to health? Is the” best” time
gone? No, not if an agent knows
where to go for assistance and
a probable solution. There are
brokers who specialize in hard
to place situations which can be
caused by approximately 10 or
more major reasons, e.g., health,
occupation, new business,
working from within the home,
working abroad, overweight etc.,
just to name a few.
In any event, returning to the
‘best time’ that an individual
should apply for this valuable
form of coverage is of course at
the earliest possible moment
and the sooner the better, even
though they can’t immediately
afford the cost (2-4% of
income, depending on age/
sex/occupation/benefit period/
benefit amount/options).
Given the fact that most
disabilities usually last less
than 2-5 years, if cost is a major
factor, what’s wrong with having
that period as an initial benefit
period and as a result, the cost
will then be substantially lower.
There are also other solutions
for lowering the cost without
reducing the benefit period, such
as reducing the benefit amount
etc.
Remember a half of loaf of
bread is better than none,
besides, most carriers provide
an option that will allow more
coverage to be purchased in the
future in order to replace the
reduced amount, or to cover
higher income, strictly based
on financial underwriting (no
evidence of medical insurability
required!). This future increase
option has some other benefits
to the insured as well such
as locking in the occupation
classification.
WHEN SHOULD
COVERAGE
BE DISCONTINUED?
Only when that person either
becomes self-insured or has
retired before the coverage
terminates which is usually at
age 65. However, if the policy
holder is still working, coverage
can be kept to at least to 75
and with some carriers longer.
If money becomes the issue for
discontinuing, even then the
policy really doesn’t have to be
dropped!
Coverage can be reconfigured,
to create a lower benefit amount,
or to a shorter benefit period.
Either of these two solutions will
lower the premium and possibly
lower it enough to keep the
policy in force.
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