Looking for an individual policy is much like buying a car. The base sticker price on the car depends on the make and model. A disability policy has a base sticker price, too. And it comes with options (riders) that you can add on, which can more than double the original price.

So what do you really need? Are you into basic transportation or do you need a luxury model? When it comes to disability insurance, we suggest you use basic transportation to get good mileage out of your premium dollars.

Definition of Disability

The most important feature in a disability policy is its definition of disability—when you are considered disabled for the purpose of collecting benefits. You can be disabled for 1) any occupation, or 2) your own occupation, or 3) you can be insured using a split definition:

• An "any occupation" definition is the most restrictive because you are only considered disabled if you are unable to engage in any gainful occupation for which you are reasonably fitted by education, training, and experience.
• An "own occupation" definition is the most liberal because you are considered disabled if you cannot perform the substantial and material duties of your regular occupation. While this is good for you, it will also cost you the most to have.
• With a "split definition", you are considered totally disabled if you are unable to perform the substantial and material duties of your regular occupation (own occupation) for a period of time (typically 2 years or longer based on your profession), then you are considered totally disabled only if you are unable to engage in any gainful occupation (any occupation) for which you are reasonably fitted by education, training, and experience.

SUGGESTION: Policy definitions of disability are typically based on your occupational class. Unfortunately, definitions tend to be more restrictive the more hazardous your occupation. When shopping for your own policy, your best bet is to find one that has an "own occupation" definition for two to five years. Beyond that, the insurance company may not issue you one and the policy can get quite expensive.

Every policy is issued with an elimination period and a benefit period. The elimination or waiting period is the time between when you become disabled and when your benefits begin. The longer the elimination period, the less costly the policy. We recommend that you have no shorter than a 90-day elimination period. If you have a sufficient emergency fund, extending your elimination period to six months could reduce your premium by as much as 30%. Remember, you are protecting yourself in the event of a catastrophic disability.

SUGGESTION: When choosing an elimination period, take into consideration how long your emergency funds will last. Also look at the short-term disability benefits you are eligible to receive.

The benefit period is the length of time you will receive benefits. Common benefit periods are two years, five years, and until age 65. Some policies are also issuing ten-year benefit periods. Policies with lifetime coverage are very rare and very expensive. Since you are insuring yourself against catastrophic disability, we recommend your benefit period last until age 65 (or the longest benefit period you are eligible for excluding one that lasts your lifetime).