Financial IQ Test: How Healthy Is Your Disability Insurance?

by Nora Dunn on 27 March 2010 5 comments
Photo: hjalmeida

Disability Insurance (and the integrity of your own coverage and how it suits your needs) is serious business; One in three people are disabled during their working lives, and those disabled for more than two months have an average disability length of two and a half years. Can you cover your expenses if you can’t work for that long?

Following is a Financial IQ Test to help you determine how healthy your disability insurance policy is. Simply look at each statement, and answer it with a YES, NO, or NOT SURE. Keep track of your answers, and we'll see how you score at the end. Then, check out the resource articles below to increase your knowledge base.

Financial IQ Test: How Healthy Is Your Disability Insurance?

Disability Insurance Lingo

I understand the difference between the “any occupation,” “regular occupation,” and “own occupation” definitions of occupational coverage.

I understand the difference between Short-Term Disability and Long-Term Disability plans.

I understand some of the inherent pitfalls of employer disability insurance, and have weighed out the benefits and drawbacks.

I know that pregnancy-related disabilities are almost never covered.

I know what the exclusions are on my disability insurance policy.

Best Value

I have minimized my premiums by selecting an appropriate waiting period, benefit period, and benefit amount.

I comparison shopped for disability insurance.

I checked with my local industry association to see if they offer discounted disability insurance plans.

I decline coverage offered by telemarketers from my credit card company.

Policy Structure

I have considered a waiver of premium rider, to reduce my expenses in the event of a disability.

I pay for my disability insurance premiums with after-tax dollars only.

I have a cost of living adjustment on my policy which indexes my benefit amount to the rate of inflation.

My policy is non-cancelable (as in the insurance company can’t cancel the policy; I can if I choose to).

Due Diligence

I have estimated what my monthly expenses will be (aside from medical expenses) if I am disabled.

I know how long I can live without an income, and have structured my disability insurance policy to start payments before I run out of money.

I considered the insurance company’s financial ratings before buying a policy with them.

I am aware of (and take advantage of) the “free look” period once I get my policy, to read it through carefully and ensure it reflects my needs.

I have looked into Long Term Care or Critical Illness insurance as possible alternatives or complements to a disability insurance policy.

Scoring

Did you keep track of how many times you answered YES, NO, and NOT SURE? Great! Give yourself the following points for each answer:

YES = 4 points

NO = 0 points

NOT SURE = 2 points

Analysis

0-24: Don’t Go Play with Traffic

Did you know that the biggest asset you have in life is your income – and your ability to keep generating it? If you haven’t looked at disability insurance, maybe you should. Some even have features like “Return of Premium” riders that give you your money back at the end of a term if you don’t make a claim. It’s like insurance…for your insurance!

25-48: Covered…but how well?

You’ve taken some time to find out what you need to know about Disability Insurance, but you may not have covered all your bases. Look into anything in the questionnaire that you didn’t quite understand, and you may find a way to save money, or better protect your needs.

49-72: Sorted

You’re at the top of the curve – congratulations! This means you probably have done your due diligence, research, and made the disability insurance decisions that are best for you. (Either that or you lied on the test)! Have a peek at some of the articles below to broaden your knowledge or fill in any of the gaps from the test.

Disability Insurance Articles to Increase Your Score

Disability Insurance: Payments and Pitfalls

MIB: The Big Brother for Insurance Companies

Long Term Care Insurance for Wise Bloggers

Critical Illness Insurance for Wise Bloggers

Credit Card Insurance? No Thanks

Other Financial IQ Tests on Wise Bread

FINANCIAL IQ Test: How Healthy is your Debt Management?

FINANCIAL IQ Test: How Healthy are your Bank Accounts?

FINANCIAL IQ Test: How Healthy is your Budget?

FINANCIAL IQ Test: How Healthy is your Health Care Plan?

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Guest's picture

Boy I failed that one miserably!

I'll have to dig into this one real soon! Looks like it would be well worth my time to.

Thanks!

Guest's picture

I had no idea that the disability figures were so high. I know I have disability insurance through work so I have never really worried about it.

I need to verify how good it actually is.

Guest's picture
Mikele R Meether

Please don't put this off. I honestly fell into a decent insurance policy and then ended up needing it. In an instant your life can totally change.

Nora Dunn's picture

Thanks for the comments, guys. Disability insurance (most insurance for that matter) is easy to ignore or gloss over, especially if we have coverage through work. We assume that we have what we need - often until we need it - at which point (hopefully) we aren't wrong. Sadly, this isn't always the case.

Guest's picture
Guest

I did pretty well. Long time ago I read about it and got myself a personal Berkshire Guardian disability policy, the max they would offer, and have kept it. They are known as having one of the better own occupation policies. My premium is lower because my cost of living increase doesn't kick in for 4 years. I also have a catastrophic rider, that I probably don't need since I have long term care insurance, but it's only $9/month.