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Shopping for disability insurance? Make sure to do your research

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There are certain items on our to-do list that just never seem to get done. While some tasks involve physical labor or a significant time allotment, others duties don't fall into the arduous categories. For example, "estate planning" or "disability insurance purchase" may have been on your to-do list for a long time. 

Many people are reluctant to address such matters because of discomfort with both lack of money and their ownmortality. While this is understandable, the failure to purchase disability insurance may lead to catastrophic financial issues, in the event of a disabling illness or injury.

Consumers who are ready to consider buying a disability policyshould congratulate themselves. Purchasing disability insurance can be an inherently complex topic. Potential policyholders should be attentive to their own needs and the available options.

To illustrate, prospective buyers need to be aware that disability policies have two different protection features. Specifically, they can purchase a policy offering one of the following components:

  • Noncancelable: The only circumstances in which an insurer can cancel the policy is for nonpayment of premiums. Furthermore, this feature allows policyholders to renew every year without a reduction in benefits or premium increases.
  • Guaranteed renewable: The insurer can't cancel the policy except for nonpayment of premiums. It also means that the policyholder has the option to renew with the same benefit level every year. The component differs from noncancelable becausethe insurer can increase the amount of premiums. However, any such increase must be applied to all other policyholders within the same rating class.

The purpose in sharing this information is not to create doubt for consumers planning to buy disability insurance. Rather, the purpose is to highlight how the process can be a complex undertaking for the uninitiated. As such, individuals may want to consider consulting with a professional and doing the necessary research.

Source: Insurance Information Institute, "What are the types of disability insurance?" July 25, 2017

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