Common Mistakes People Make When Buying Disability Insurance (And How To Avoid Them)

mistakes buying disability insurance policy coverage

Buying disability insurance is one of a number of steps that you can take to safeguard your finances. By providing income in the event that a person is unable to perform their work and earn money as a result of a disability, disability insurance is a worthwhile investment that can help you to avoid unforeseen inconveniences and money troubles. 

However, finding the right disability insurance for your needs is not always straightforward. Let’s discover 3 common disability insurance pitfalls and discuss what exactly you can do to avoid them. 

Failing To Buy Disability Insurance While You Are Young And Healthy 

When you are young and healthy it can be all too tempting to assume that you do not need to purchase disability insurance. Furthermore, if you have just started your first job after college or university you might have other responsibilities that are eating away at your finances such as rent payments or tuition debts. However, if you are in a financial position to do so, taking out disability insurance sooner rather than later is strongly recommended. 

It is no secret that, while you are young and healthy, you are usually more likely to be underwritten successfully. Most insurance policies require medical underwriting, and this usually includes reviews of your medical records, blood tests, and in some cases, a physical assessment. The longer you wait to take out disability insurance, the more likely it is that your medical history has grown. Any history of injuries or illness can result in a denied insurance application. To ensure that you get the disability insurance coverage that you deserve, act now and try to find a basic policy geared towards younger people. As your career flourishes, you can then upgrade to a more comprehensive policy. 

Relying Solely On Employer Coverage 

If you work for a large company or organization there is a high chance that your employer will provide long-term disability insurance. Nonetheless relying exclusively on an employer-provided policy cannot always protect the entirety of your income in the event of serious illness or injury. Whenever businesses try to cut costs, insurance contributions can often take the brunt, and this can dramatically reduce your entitlement to disability benefits. In addition, workplace disability plans are also taxable, and this can have an impact on the amount of money you are entitled to receive from the policy. Employers are also less likely to provide short term disability insurance if this is the case. 

What is more, it is interesting to note that most workplace disability insurance policies have strict limits and caps. This means that income from bonuses and other forms of compensation associated with being a business owner or partner are not included. Consequently, the solution to these concerns is to invest in an individual disability insurance policy to boost any employer contributions. Although individual disability policies sometimes have higher premiums, because applicants are individually underwritten, these types of policy do frequently offer better benefits. 

Underestimating Your Income 

Disability insurance rates are usually offered on the condition that you are healthy. That being said, predicting your earning potential and future income is still difficult to determine, especially at the beginning of your career. Under ordinary circumstances, as you gain experience, move into a specialty, or open your own business, your income will increase. As your life changes, so will your financial needs. In conjunction, as your career progresses, your income can become stretched across homes, relationships, and children. 

With all of this in mind, it is not uncommon for your disability insurance policy to gradually become outdated. A policy purchased at the start of your career might no longer provide enough protection, leaving you with inadequate funds to cover your expenses. While seeing into the future is not always possible, combining an employer provided policy with individual disability insurance coverage can help you to identify and remedy any gaps and limitations in your insurance. 

By avoiding common mistakes, you can develop the peace of mind that your income is protected. To make sure that you get the disability insurance you need to safeguard your earnings, remember to take your current financial situation into consideration while also being mindful of your future plans. You should also be sure to shop around to find the best insurance policy for your needs. 

Looking for further insurance related support and guidance? Check out this overview of the benefits of using comparison tools when shopping for insurance.

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