Disability insurance is a key component of individual’s financial plan, and provides valuable coverage to guard against the risk. To further reinforce the need for disability insurance, the CDC has reported that nearly 40% of people will have a long-term disability of at least 90 days before they reach the age of 65.
Since a long-term disability can ruin a person’s financial health, it would make sense that everyone would have the coverage. However, only 58% of full-time employees say they have disability insurance protection, according to the 6th annual MetLife Study of Employee Benefits Trends.
Disability Insurance Expensive but Necessary
Nevertheless, many individuals do not have coverage because they are turned off by the high price tag that typically comes with a stand alone disability insurance policy. As a result, they are putting themselves in a dangerous position that could have severe financial ramifications for themselves and their families.
There are alternatives for getting coverage that do not involve purchasing a stand alone disability insurance policy. A disability income rider is one approach that one can take to hedge against the possibility of incurring a financial tragedy. These riders are usually sold as an attachment to an individual life insurance plan.
Buy Term Life Insurance with a Disability Insurance Rider
Obtaining a life insurance policy with a disability rider is fairly simple. First and foremost, since every life insurance plan doesn’t offer this feature, you will need to find a company that offers this type of policy. After applying for coverage, the life insurance underwriting process is generally used as a starting point to determine whether or not you will be able to qualify for the additional disability coverage. In addition to the life insurance questions, the company may come back to you with additional questions in order to prescreen you for the disability insurance rider as well.
After the underwriting process is complete, you are usually either approved or denied for the coverage, as there usually isn’t any type of rating scale like there is with traditional life insurance. DI riders are usually very attractive due to the fact that they are cheaper in price than most stand alone disability plans. In addition, the insured can kill two birds with one stone instead of having two separate policies with different billing cycles.
Please keep in mind that the DI rider’s coverage tends to be much more limited than it would be if you were to purchase an individual DI policy. Most life insurance companies that offer DI riders only offer benefits of up to $3000 per month, and the coverage only lasts for 2-3 years. As a result, this type of policy usually serves as a great resource for disability insurance coverage if you have none, but doesn’t truly protect against a prolonged disability situation.
