What Happens If You Can't Work?

If you think you'll never be disabled, think again. It happens, unexpectedly, to more than a few of us. Learn all about disability and the insurance available to protect against it in "Prepare to Be Disabled."

Next, if you're looking for a disability policy, look for one that is guaranteed and noncancelable. "Guaranteed" means the payment is fixed, while "noncancelable" means the policy will remain in effect as long as you keep paying the premiums.

Examine the policy's definition of "disabled" and make sure it's what you want. Ideally, you'll want it to cover any disability related to working in your current occupation -- not any occupation.

Carefully evaluate how the policy will pay you, should the need arise. Make sure that the payment can or will increase as your income increases. For example, if you buy the policy when you're earning $30,000 and become disabled 15 years later, when you're earning $75,000, you don't want your benefit based on the initial salary. Some policies offer riders that will permit the payment to increase with inflation as well.

Check out how long the policy will pay you. A good one will cover you until you reach retirement age. Others may stop after five or 10 years. See what percentage of your salary the policy will pay. Some pay 60% or less, others pay 75% or more.

One good way to save money on the policy is by increasing the waiting period (also called the "elimination" period). Some policies kick in very soon after you become disabled. Others require a waiting period of up to several months. You'll typically have to pay more for more immediate coverage. But, if you're prepared with a bit of an emergency nest egg, you can opt for a lengthy waiting period to reduce your cost. Invest the savings, and you might well surpass the value of that little nest egg.

One last consideration is a "return of premium" rider that you might get offered. With this, you pay a higher premium and get some of your money back if you don't ever use the policy. We're generally not big fans of this approach, since we'd rather have you invest that extra premium amount yourself.

Here is a good overview of disability insurance basics. Learn more about insurance in our Insurance Center. You may not have thought about some kinds of insurance, such as disability or long-term care insurance, but they're vital for many people. Take a little time to learn more, and you may be very happy you did.

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