| First of all, if you are reading this article because you | | | | In addition to having a quality definition of total |
| are a young professional in the market for Disability | | | | disability, you need to be sure that your policy will |
| insurance, Congratulations! You are taking a step that | | | | protect you from a partial disability as well - this is |
| many people do not take until it is already too late. | | | | known as a Residual Disability. Similar to the definition |
| Disability insurance protects the most valuable | | | | of total disability, every insurance company will have |
| financial asset we have - the ability to earn an | | | | its own version of a residual or partial disability |
| income. | | | | benefit as well. Traditionally, residual benefits will be |
| Purchasing a quality Disability insurance policy while | | | | paid when you have experience a 15-20% loss of |
| you are young is one of the hardest yet smartest | | | | income, due to an injury or sickness. Benefits are |
| financial decisions you will ever make. Think about all | | | | normally paid proportionately to the loss of income |
| of the goals, hopes and dreams you have. Aside | | | | experienced, so if your income reduces by 50%, you |
| from finding a life partner and perhaps starting a | | | | may be eligible for 50% of your monthly benefit. |
| family, they will all most likely rely on one very | | | | Because most disabilities are caused by sickness, and |
| important thing - money. We all know that money | | | | most sicknesses do not appear overnight, you are |
| does not grow on trees and so the only way to | | | | more likely to suffer a partial disability than a total |
| have it, is to work hard and earn it. Being able to | | | | disability. Some companies will provide residual |
| work and earn an income is our greatest financial | | | | disability benefits in a standard policy and others will |
| asset. It allows us to accomplish all of the goals, | | | | require that you select it as an optional rider. |
| hopes and dreams we have. But what happens when | | | | Regardless of the setup, residual disability benefits |
| an unexpected injury or sickness prevents you from | | | | are an essential part of a quality disability contract so |
| earning an income. A total disability is equivalent to an | | | | be sure to include them in your policy. |
| economic death, but even a partial disability can | | | | At this point you have created a solid contract and |
| cause a severe financial struggle. Disability insurance is | | | | the only thing left to decide will be which optional |
| a product created to solve this exact uncertainty. If | | | | riders you need. First and foremost, you should be |
| due to an injury or sickness you are unable to | | | | reminded that Disability insurance is a product used to |
| perform your occupation and earn an income, this | | | | protect your income. Throughout your career, you |
| coverage can supplement up to 60% of your income | | | | should expect your income to increase and thus must |
| on a tax-free basis while you are disabled. As a | | | | have the ability to increase your disability coverage |
| young professional it is important to obtain a quality | | | | as well. You can achieve this with two of the optional |
| policy that protects the life style you have today but | | | | riders available with most major Disability carriers. |
| also the life style you will have tomorrow. | | | | The first is with an Automatic Increase Option rider |
| One of the initial things you should consider is how | | | | which will automatically increase your disability |
| much coverage to begin with. As a young | | | | benefits by 3-5% each year, for the first 5 years of |
| professional, you are probably earning less money | | | | the contract. There is no cost associated with this |
| now than you will ever earn again. Additionally, the life | | | | benefit and you are not required to accept the |
| style you maintain is probably fairly simple and less | | | | increase if you do not want to. Automatic increases |
| expensive than it will be in the future. Aside from | | | | do not require medical information or financial |
| outstanding loans, debts and regular living expenses, | | | | documentation to occur. Quite simply, unless you |
| you hopefully do not have very many financial | | | | request not to have an increase, both the benefit |
| responsibilities at this time. Nonetheless, it is important | | | | and premium will increase at each of the first five |
| not to spend all of your money on insurance | | | | policy anniversaries. |
| premiums either. In order to help keep the premiums | | | | The second and most important way to protect |
| on your policy reasonably priced, you should obtain a | | | | your future earnings is by purchasing the FIO (Future |
| little over the minimum amount of money you need | | | | Increase Option) rider, which allows you to increase |
| to satisfy your current monthly expenses. This will | | | | your monthly benefit on each policy anniversary. A |
| allow you to sustain your current lifestyle, in the case | | | | policy owner can exercise these increases regardless |
| of a disability, without being a financial burden to | | | | of any changes in health by simply providing financial |
| someone else. | | | | documentation (tax returns) that warrants an |
| There are a few contractual features I suggest you | | | | increase in benefits. Although there is an extra cost |
| seriously consider when designing your policy. For | | | | associated with this benefit, as a young professional |
| starters, you want your coverage to be | | | | it is pertinent for you to have an FIO rider included in |
| non-cancelable, which means that regardless of all | | | | your policy. |
| circumstances, as long as you pay premiums on time | | | | If you decide to go with a "to age 65" benefit |
| the insurance company cannot cancel your policy, | | | | period, you may want to consider one other rider - |
| change its premiums, or modify any provisions until | | | | the COLA (Cost Of Living Adjustment) rider. The |
| you reach age 65. Most likely you will have this | | | | COLA rider is designed to hedge the risk of inflation |
| insurance policy for the next 30 or 40 years of your | | | | on a long-term disability claim. This rider will adjust |
| life, and although it is unlikely for an insurance | | | | your monthly benefits by 3-6% each year that you |
| company to actually change anything, a guarantee is | | | | remain disabled, beginning after year one. Similar to |
| much more preferable. Having a Disability policy that | | | | the FIO, this is an optional rider and there is a cost |
| is cancelable is equivalent to accepting a promise | | | | associated with this benefit. The average long-term |
| from someone who maintains the rights to change | | | | disability claim lasts 2.5 years - clearly a 2.5 year claim |
| the promise - your income is far too important to | | | | does not warrant a need for the COLA rider since it |
| take that risk. | | | | will not be worth the cost, unless you become |
| Next, you want to be sure the policy you purchase | | | | disabled within the first few years of owning the |
| has a definition of disability that truly protects your | | | | policy. For someone who experiences a 20-year claim |
| occupation or specialty. More than likely you have | | | | though, the COLA rider may just be a lifesaver. This |
| worked very hard to get to where you are and | | | | rider cannot be described as necessary or |
| should protect your future with equal interest. Each | | | | unnecessary. It is simply a question of whether the |
| insurance company you look at will use a slightly | | | | protection it offers is of value to you. |
| different description of what constitutes a total | | | | The top Disability carriers will also offer other optional |
| disability. Some definitions require that you are unable | | | | riders that I have not discussed, such as: |
| to perform a specific occupation and others will | | | | Catastrophic disability benefits, Return of premium, |
| require that you are unable to perform any | | | | Spousal disability benefits, etc. Aside from |
| occupation. There is even a version known as a True | | | | Catastrophic benefits, these riders are not commonly |
| Own-Occupation definition, which allows you to | | | | used and usually do not make financial sense to |
| receive benefits while gainfully employed in a new | | | | obtain, even if you are willing to spend the extra |
| occupation, as long as you remain unable to perform | | | | money. If you would like to add catastrophic benefits |
| the original occupation. The more specialized your | | | | because of how inexpensive they are, great! Do not |
| profession, the more important it is that you protect | | | | waste your time with the others though. |
| it. As a brain surgeon, a hand tremor can prevent | | | | The final and most important part of obtaining a |
| you from being able to perform surgery, but perhaps | | | | Disability insurance policy is for you to work with a |
| not from practicing a different form of medicine. For | | | | Disability specialist. A lot of insurance agents out |
| specialized professions such as a brain surgeon, it | | | | there are licensed to sell Disability insurance, but |
| makes sense to focus on obtaining a policy that has | | | | probably should not be. There are a lot of details |
| a True Own-Occupation definition of disability. For | | | | involved with purchasing Disability insurance and the |
| many other professions, it can be considered a bonus | | | | person you work with may very well end up serving |
| but not so much a necessity. Regardless, you want | | | | as your advocate. Please make sure you work with |
| to be sure that the definition states it will pay a | | | | an agent that is experienced in this specific type of |
| benefit when you are unable to perform "your | | | | coverage. |
| occupation" and not "any occupation". | | | | |