What to Look for in Disability Insurance

By Katt, Peter C. | Consumers' Research Magazine, February 1993 | Go to article overview

What to Look for in Disability Insurance


Katt, Peter C., Consumers' Research Magazine


Most people, however grudgingly, realize that they need some sort of life insurance, but many do not plan for the possibility that they will suffer a debilitating accident or illness during their working years.

What is the risk that the average individual will suffer a disability? According to one disability insurance brochure, the "probability of at least one long-term disability (90 days or longer) occurring before age 65 is: 50% for age 25; 45% for age 35; 38% for age 45; and 26% for age 55." However, according to the U.S. Public Health Service, lawyers, accountants, physicians, and dentists had a 4% incidence of a disability lasting 60 days or longer during their careers. Unfortunately, research has proven unsuccessful at obtaining any useful morbidity (sickness and accidents) statistics from various insurance companies selling disability insurance policies that would clear up this discrepancy.

How should disability insurance be viewed? As with other insurance, it depends on the extent of existing savings and the number of people dependent on the worker for support. A young professional with several children, for example, should consider disability insurance a necessity. However, an older professional who has sufficient assets to protect himself and family from a loss of income due to a disability is in less need of such a policy.

Policy Options

Disability insurance has important policy options from which the insured can select. The premium cost of the policy will depend on the policy options selected. With proper attention to rational risk management, consumers can customize their coverage to meet their particular needs.

* Benefit Period. This is the period the insurance company is obligated to pay the monthly disability benefits. Common benefit periods are five years, to age 65, and lifetime. Obviously, the longer the benefit period selected, the higher the premium.

Although the risk of a disability lasting more than five years is very low, I would not recommend that a young professional select such a short benefit period. The greater concern here should be catastrophic disability.

For most individuals, optimal coverage would be (when available) lifetime for an accident-induced disability and to age 65 for a sickness-induced disability. My rationale is that an accident-induced, life-long disability may not reduce the insured's life expectancy, while a lifelong disability caused by sickness probably will.

However, there is at least one situation in which a five-year benefit period may make sense: If you are fortunate enough to be a child of wealthy parents and stand to inherit a substantial sum, say, more than $1 million, in the not too distant future. A five-year benefit period may be rational in this situation, because the chances of a disability lasting longer than five years is very remote, but if it did the large inheritance in the future would provide a secure asset base.

* Waiting Period. This is the period between commencement of the disability and payment of monthly benefits. The longer the waiting period, the lower the premium. Waiting periods run from 30 days to one year.

For most young professionals, a 90-day period is a good compromise between getting benefits earlier and having lower premiums. For young professionals with several young children, a spouse who works only in the home, and perhaps outstanding college loans, a 30-day waiting period may be more appropriate. But this short waiting period should be increased as soon as the family is able financially to handle the longer waiting period.

As professionals progress in their careers, they should reassess disability-income insurance needs. If significant assets have been accumulated allowing for a good deal more disability income self-insurance than was possible when they were young, professionals should probably reconsider their waiting period. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

What to Look for in Disability Insurance
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.