Choosing Disability Insurance? Avoid These 5 Common Traps

Disability insurance provides a financial safety net if you're unable to work due to injury or illness, but choosing the right policy can be challenging. There are several traps to avoid that could leave you underinsured or with coverage that doesn’t meet your needs. Here are 5 common mistakes people make when selecting disability insurance and how to avoid them.

Table of Contents

1. Benefits Could Cancel Each Other
2. Your Policy Is Not Occupation-Specific
3. Incorrectly Estimating Your Future Income
4. Your Disability Insurance Is Part of Your Benefits Package
5. Waiting Too Long to Buy a Disability Insurance Policy

Common Mistakes to Avoid

1. Benefits Could Cancel Each Other

   One of the most overlooked issues is how your disability insurance might interact with other benefits, like Social Security Disability Insurance (SSDI) or workers' compensation. Some policies include provisions that reduce your benefit payout if you receive compensation from other sources. This means the combined total you receive may be significantly lower than you expect. Before signing a policy, ensure you understand how it integrates with other benefits to avoid this trap.

2. Your Policy Is Not Occupation-Specific

   Disability insurance policies can vary based on whether they cover your specific occupation or any occupation. Some plans only provide coverage if you’re unable to work any job at all, which may not protect you if you're unable to perform your specific occupation but could technically do another lower-paying job. To ensure you’re adequately protected, opt for a policy that specifies your occupation, especially if you work in a specialized or physically demanding field.

3. Incorrectly Estimating Your Future Income

   When choosing disability insurance, it’s easy to base coverage on your current income. However, most people anticipate their income will grow over time. Failing to account for this can result in inadequate coverage down the road. Consider your future earning potential when selecting coverage limits. Some disability insurance policies offer options to increase your coverage as your salary grows, ensuring you’re protected long-term.

4. Your Disability Insurance Is Part of Your Benefits Package

   While employer-provided disability insurance can be a great perk, relying solely on this coverage can be a pitfall. Employer plans often offer limited benefits and may not cover all of your income. Additionally, if you leave your job, you might lose your disability coverage. It’s wise to supplement employer-provided insurance with an individual policy to ensure you’re adequately protected regardless of your employment status.

5. Waiting Too Long to Buy a Disability Insurance Policy

   Many people put off buying disability insurance, thinking they won’t need it until later in life. However, waiting too long can be a costly mistake. Disability insurance premiums are often lower when you’re younger and healthier, and your options for coverage may be more limited if health issues arise. The sooner you buy disability insurance, the better protected you'll be in the event of an unforeseen injury or illness.

Choose Your Disability Policy with Care

Disability insurance is a crucial part of financial planning, but selecting the right policy requires careful consideration. Avoid these common traps to ensure you’re getting the protection you need. Look for policies that offer occupation-specific coverage, account for future income, and aren’t overly dependent on employer benefits.

Also Read: Short-Term Disability Insurance: 5 Myths Debunked

Protect Your Future with Our Insurance Experts

At Kneller Insurance Agency, we can help you navigate the complexities of disability insurance to find the right policy for your needs. Contact us today to discuss your options and safeguard your financial future. Call us at 518-392-9311 to get started.