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When considering which Individual Disability Insurance policy to purchase, consider the following suggestions from David Petersen, founder of Affording Cares.

Particularly note the steps to take if you have an opportunity to purchase an individual disability insurance policy and to obtain group Disability Insurance as well.

Before purchasing disability insurance, get a fix on what other income benefits you may have so you will have an idea about the gaps. For instance, whether you have disability coverage through work either because of an employer benefit or because of group insurance. Also look at your government benefits, such as Social Security Disability Insurance (SSDI).

If you have a choice among more than one Individual Disability Insurance policy, for help choosing the best one for you, see: Disability Insurance: Evaluating Individual Policies.

If You Have The Opportunity To Purchase An Individual And A Group Disability Income Policy

Group coverage is generally much less expensive than individual disability insurance. If you can obtain group coverage through an employer, employers that offer this insurance benefit pay all, or at least part, of the premium.

Because individual plans pay a flat amount, you can purchase an individual disability income policy, then join a group that has group long term disability coverage policy and be eligible to receive full benefits under both policies should you become disabled. The individual policy must be purchased first because at the time of its purchase, any other disability income benefits, including group long term disability, are taken into consideration in determining the benefit amount the company will let you purchase.

Further, If you're lucky enough to have both employer and individual disability coverage, and if your employer coverage provides benefits during the early months of your disability, consider:

  • Increasing the waiting period under your individual policy to lower your premiums on your individual policy.
  • Putting the premium savings in a separate savings account to be used if needed during the early part of a disability.

Type Of Policy

Purchase a Non-Cancellable/Guaranteed Renewable policy if available because it restricts the insurance company's right to modify or cancel the policy.

Elimination Period

The shorter the Elimination Period, the more expensive the policy; the longer the Elimination Period, the less expensive the policy.

When making a purchase, compare the costs, but also keep in mind how long any premium savings would last. If you choose a 90 day or 6 month waiting period rather than a 30 day period, and set aside the savings you reap by paying cheaper premiums, you will have the money available to help you through until benefits begin.

Benefit Amount

What benefit amount should you purchase? Ideally, you should receive as much income on disability as you receive while working. At the least, aim for purchasing enough disability insurance to make up for the difference between income from other sources such as interest on savings, dividends, and other income and the amount of your expenses on disability.

How much you will be permitted to purchase depends on the amount of your income when you purchase the policy. Since an insurance company doesn't want to provide an incentive for you to become disabled, many companies limit benefits to a maximum of one half of the applicant's wages. The limit may vary if you are self-employed or if you are a professional such as a physician or CPA. The writing agent will help you arrive at how much benefit can be purchased.

CAUTION: It is not advisable to lie about your income to obtain a higher benefit than you are entitled to under the insurance company's rules. Should the company discover the error, it may be able to void the contract entirely and not pay you any benefit or impose a lower benefit.

Maximum Benefit Period

Look for a policy that starts coverage as soon as you may need the income.

As to the length of time you are paid a benefit, purchase a policy which pays to at least age 65 – or for life if at all possible. At a minimum, it is advisable to obtain benefits for at least five years. The premium difference between a five year benefit and age 65 is rarely very much.

Definition of Disability

If it is available, and if it is not prohibitively expensive, consider purchasing a plan that provides an “own-occupation” definition of disability for the life of the policy. This will make the claims process easier should you become disabled.

Premium Amount

In general, less expensive is better. That said, price is only one of the factors in determining whether a particular Disability Insurance policy is best for you.

If your health condition results in a rated (higher than normal) premium, at least you’ll have an assurance of an income stream in case you become disabled.

Note: It is preferable not to deduct Disability Insurance premiums from your taxes even if you are self-employed. If you don’t deduct the premiums, you receive the disability benefits income tax free. Receiving the benefits income tax free should you become disabled is generally far more valuable than any savings you would realize by deducting the premiums.


If affordable, consider purchasing a Guarantee Issue Rider. This will allow you to increase your benefit amount as your income increases without the necessity of having to prove your insurability over again. Other riders may be beneficial depending on your budget and your individual circumstances.