There are several decisions to make regarding disability insurance: the type, the features and the policy options
There are two types of disability insurance policies: Short-Term Disability (STD) and Long-Term Disability (LTD):
Short-Term Disability policies:
- Have a waiting period of 0 to 14 days
- Have a maximum benefit period of no longer than two years.
Long-Term Disability policies
- Have a waiting period of several weeks to several months
- Have a maximum benefit period ranging from a few years to the rest of your life.
Disability policies have two different features: non-cancelable and guaranteed renewable.
Non-cancelable means what it sounds like: the policy cannot be canceled by the insurance company (except for nonpayment of premiums). This gives you the right to renew the policy every year — without an increase in the premium or a reduction in benefits.
Guaranteed renewable means you have the right to renew the policy with the same benefits and not have the policy canceled by the company. However, your insurer can increase your premiums, as long as it does so for all other policyholders in your same rating class.
Additional purchase options: The right to buy additional insurance at a later time.
Coordination of benefits: The amount of benefits you receive from the insurance company depends on other benefits you receive because of your disability. Your policy specifies a target amount you will receive from all the policies combined. This policy will make up the difference not paid by other policies.
Cost of living adjustment (COLA): COLA increases your disability benefits over time based on the increased cost of living measured by the Consumer Price Index.
*Note: If you select the COLA, you will pay a higher premium.
Residual or partial disability rider: If you are still partially disabled, this provision allows you to return to work part-time, collect part of your salary and receive a partial disability payment
Return of premium: requires the insurance company to refund part of your premium if no claims are made for a specific period of time declared in the policy.
Waiver of premium provision: this means that you do not have to pay premiums on the policy after you’ve been disabled for 90 days.