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The purpose of disability insurance is to replace your income in the event you become disabled and were unable to work. Today many employers provide some form of disability insurance but you need to review the employer options very carefully. In many cases supplementing the employer provided policy with your own personal policy can be a wise investment.
As with other types of insurance, premiums are determined by a combination of age, sex, income and your occupation. The typical coverage amount will range from 50% to 70% of your monthly income.
There are also additional riders or options that can be purchased with some disability policies, don’t be afraid to ask for additional information on these from your agent.
The most common riders include:
- Cost of Living riders, also known as COLA. As the cost of living increases so does the coverage amount.
- Guaranteed Renewable policies. This prevents the insurance company from canceling your policy, except for non payment of premiums.
- Residual Rider. Most insurance companies will determine that you are either well enough to return to work, or your not. If you’ve ever been out of work, even if it is for the flu, you know that there are times when you feel you could probably do part of the work or work part-time and ease back into full time. With the residual rider it allows you to work part-time and receive part-time pay and part disability payment
The riders mentioned above can be quite costly to add to a policy. However, if the situation warrants, investigating them on the front end is always better for the consumer than trying to add them at a later date.
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