Individual disability insurance is a simple concept. It is an insurance product designed to replace anywhere from 45 to 60% of your gross income on a tax-free basis should a sickness or illness prevent you from earning an income in your occupation. Every disability insurance policy from every insurance company is very different so it may not be adivisable to simply shop for the most competitive rate.

Many of us have never had a major medical problem but the truth is that about 30 percent of Americans age 35 to 65 will suffer a disability lasting at least 90 days sometime during their careers. Should you ever need the protection a disability policy can offer you’ll be glad you took financial precautions now. Without coverage, an unexpected disability can easily drive you into serious debt if not bankruptcy.

Many people have a disability plan through our employers but most company-issued disability insurance programs only provide you with 60% of your salary and sets a monthly maximum of $5,000 to $10,000, which can be even less than 60% of a highly compensated employee’s salary. And there’s another problem; those benefits are also fully taxable, which means you’re actually getting a lot less than 60% of what you’re used to. Details like this make it clear that everyone should be mindful of their company-sponsored programs while looking for any opportunities that may be better.

When considering a disability policy you will want to ensure that it is renewable.

There are three options:

1. A non-cancelable and guaranteed renewable policy
2. A guaranteed renewable policy
3. A conditionally renewable policy

While the price for a non-cancelable policy can be a little steep it by far the best option as it locks in your rates and benefits. The insurance company can not make changes unless you request them.

A guaranteed renewable policy is the second best choice. After you enter in to this type of policy, your insurer doesn’t have the right to drop you, but they reserve the right to raise prices for specific reasons such as making a claim or reporting an injury that could increase the odds of making a long-term claim.

The least preferable choice is conditional renewable policy. If possible, avoid conditionally renewable policies as the insurer can put any conditions on your policy or raise rates at any time for any reason.

An important thing to look for when considering disability insurance policies is the definition of total disability.

The most consumer-friendly definition of total disability is “own-occupation disability.”

If you are disabled and cannot perform the principal duties of the job you currently have, you get paid your disability benefit even if you can do some other tasks.

This definition is extremely important as it means you will not be penalized for working if you can’t yet go back to your full-time job. For example, if you can not go back to your shipping job due to a back injury that limits the amount you can lift, you could work as a salesperson during this claim. The inverse of this definition is “any-occupation disability.” Under this definition you do not get a benefit unless you are completely unemployed and unable to do any work.

When looking at a new disability policy ensure that it also includes partial or residual coverage. On average, 1/3 of all claims is for partial disability coverage. Insurers only pay partial disability benefits if you can work at your job for a reduced period of time. For example, after an accident, someone might leave work entirely for six months, then work on a reduced schedule for the next year in order to be reintegrated into their position. If working part-time meant the person lost a percentage of his income, partial disability coverage would kick in and pay a proportionate benefit.

If you have disability coverage, you may not use it for decades and hopefully you never will. However, you may find a use need to use it in 15 years from now. Due to economic factors and inflation, the policy benefits you have now may pay for considerably less than it does now. A smart person will buy a rider that adjusts your policy for inflation, particularly if you’re in your younger. Another option to consider is a “future purchase option”. It allows you to buy more coverage as your salary rises or your business expands. This too is especially good for people just starting their careers.

As I am sure you can see, disability insurance is a good option regardless of what profession you are in. We just never know when we might fall at work, twist our back, slip in the shower or loose an appendage.

Any injury, no matter how small it seems now, has the potential to have serious complications later in life. If you do not have a suitable disability program in place you may find yourself having to face being unable to work and only receiving 40% of the pay you are used to. The small price of 1 to 3% of you r yearly income is a small price to pay for the security that is offered with a good disability policy.