The Not-So-Fun Stuff on Your To-Do List: Preparing for the Unexpected

Sixty-five percent of disability claims to Social Security are denied and, in some states, it can take up to two years to complete an appeal. Can you afford to wait even six months to receive a paycheck?

Also, 350,000 bankruptcies result from disability. In 2005, half of all foreclosures were for the same reason. (www.lifehappens.org) Don't depend on the government to cover your income, take your own action!  You don't have to cover your income completely, even a partial benefit can make the different when it comes to monthly expenses.

So, you know you need some kind of coverage, what are your options? Here are a few specifics on the options that come with disability income insurance. Understanding the options will help you make a more educated decision on the type of policy that works for your needs.

1. Waiting period - Pretty self-explanatory, on the day you become disabled, the clock starts and this is the time you have to cover costs out of your own savings before the company will pay you benefits. If you have short-term coverage through work, buying a policy with a longer waiting period will save you money and make more sense.

2. Length of benefit - This is how long the company will pay you benefits. It can range from short term (6 months) to 10 years, or can be based on a specific age, age 65 or 67. Things to consider: Would you consider a new career, should your disability prove to be longer term for your specific career? Do you have other career options now or are your skills somewhat specific? These are questions to help you determine the right length of time. In any case, some coverage is better than no coverage at all, so if you can only afford shorter term, do it.

3. Definition of disability - This one can be a little more confusing, but basically, it states what defines a disability, based on the option you choose. It can range from being unable to complete your specific job now, a broader term that states you are unable to complete duties for a typical job in general, or can be based on social security's definition of disability, which is much stricter. Again, deciding how flexible your job skills are will help you determine which one fits for your situation.

4. Dollar amount of coverage - This amount will be based on your income now. You can get coverage of  about 50 to 65 percent of your income. There might be some options for higher amounts, but this coverage is not designed to cover your income loss completely. It's meant to cover immediate needs until you can recover. You will have to prove your income, so if you are self-employed, be prepared to provide as much documentation as possible.

5. Guaranteed renewal or non-cancelable - This is an important option, it guarantees that the company can never cancel your insurance or make changes to the benefits or options. Your premiums can go up, but your coverage will stay intact.

I touched on some of the more obvious and basic options that you will typically come across in a policy, but there are other factors to consider. This should get you on the right track to choosing the right policy and will help you better understand how it can fit into your specific needs. If you have questions, don't hesitate to call us or post comments.