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What you should know about choosing a long-term disability policy

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Americans are currently choosing their employee benefits for the upcoming year. One employer-provided benefit that too many people neglect to take advantage of is long-term disability insurance. Many companies offer this insurance to their employees at a very low rate and without the possibility of being turned down because of pre-existing conditions.

No matter how healthy and able-bodied we are, we're all just one illness or accident away from being unable to work for an extended period. According to the Social Security Administration, over 25 percent of 20 year-olds will be suffer a disability by the time they are 67.

Many disabling incidents leave people unable to work for at least three months. How many people can afford to forego their income for that long? Long-term disability insurance generally pays up to 60 percent of your salary before taxes.

If your employer doesn't offer long-term disability insurance, you may want to consider purchasing a policy yourself. Since you'll be paying the full premiums, you'll want to shop around to get a worthwhile policy while not paying more than you need to. Here are some things to keep in mind:

-- Get the insurance while you're still healthy. If you have pre-existing conditions such as carpal tunnel syndrome when you purchase the policy, those conditions won't be covered.

-- Purchase a non-cancelable policy. The insurer can only cancel it if you don't pay your premiums. It also allows you to renew the policy on an annual basis without any premium increase or benefit reduction.

-- Choose a longer waiting period if possible. The longer the policy takes to kick in, the less expensive the policy generally is. For example, if you can keep enough in savings to support yourself and family for 60 or even 90 days, you'll pay less for the policy than if you have just a 30-day waiting period.

-- Consider an "own occupation" rider on the policy. This allows you to get disability insurance benefits if you're unable to continue to work in the occupation you were in when you became disabled. Otherwise, you may not receive benefits if you are able to work in a different occupation.

Choosing a long-term disability policy on your own can be daunting. You can help prevent surprises in the event that you need the insurance if you seek the advice of an insurance expert before you purchase a policy.

Source: Consumer Reports, "Smart Strategies for Disability Insurance," Catherine Fredman, Nov. 12, 2015

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