5 Types of Disability Insurance

There are two types of disability insurance, but often the features of these policies are classified as types of insurance. As a result, you end up with a longer list of the types of policies available. What's important is that you understand what you're buying, and you have to be clear on your purpose for buying disability insurance in the first place. Here are the products that you can ask an insurance agent about:

1 - Non-Cancelable Disability Insurance

You'll want non-cancelable disability insurance if you can afford it. Unless you stop paying the premium, the insurance company cannot cancel the policy. Another great benefit is that the rates remain the same year after year, while the benefits remain the same. When comparing disability insurance products, your first question needs to be whether the insurance being offered is non-cancelable. Keep in mind that even though the insurance company can't cancel the policy, you can choose to cancel it if you wish.

2 - Guaranteed Renewable Disability Insurance

If you'd like the option to renew your coverage, but not pay higher premiums for a non-cancelable policy, then consider a guaranteed renewable disability insurance policy. The only problem is that your insurance company has a right to raise the premium if you decide to renew the policy. You may not be able to afford to pay higher premiums at a future date, and applying for new disability insurance with another company may result in even higher premium costs. Weigh your options carefully before buying this type of insurance.

3 - Conditionally Renewable Disability Insurance

Your insurance company can cancel the policy if one of the conditions stated in your contract is met, when you buy a conditionally renewable disability insurance policy. There's also the likelihood that you premiums will go up. Some group insurance policies are conditionally renewable, and that's why major associations are able to offer members very low rates. It's important to read the policy terms carefully.

4 - Cost of Living Adjustment Disability Insurance

With all the talk about inflation and increased living costs, you may want to look into a cost of living adjustment policy. The benefits increase as the cost of living rises, and that's based on the Consumer Price Index. It's the best policy available, because you can have the assurance that the benefits paid to you will be enough to cover your bills at the time of disability. You could get stuck with low benefits, compared to your living costs in the future, and find yourself struggling to make ends meet.

5 - Business Overhead Expense Disability Insurance

One of the best policies for business owners is a business overhead expense (BOE) disability insurance. It pays for all expenses related to the business, including employee salaries, if the insured becomes disabled. Many "small" business items are covered, including professional membership dues and postage. Most insurance companies offer a two-year or less coverage period, but it's a great policy to consider for a small business.

Your financial and family circumstances will impact which type of disability insurance you choose. In making your decision, focus on the policy terms more than the premium costs. 

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