What is the Benefit Period?

The Benefit Period is the maximum length of time a policy will pay benefits for continuous disability. If you choose the option To Age 65 and are continuously disabled at age 40, you would be paid every month for the next 25 years. The Provider Choice disability insurance policy offers several different options to choose from:

• To Age 65
• To Age 67
• To Age 70
• Graded Lifetime Benefits
• 10 Years
• 5 Years
• 2 Years

How Do I Know Which Option to Use?

The following data shows what percentage of people purchased each benefit period over a recent three-year period. As you can see there is a clear number one choice.

Benefit Period to Age 65

As you can see from the table above, 78.29% of people who purchase a policy select the “To Age 65” benefit period. It is clearly the most common choice. However, the new “To Age 67” and the "To Age 70" benefit periods have only been around for a few years. Agents have habits just like anybody else, and most agents have been used to selling "To age 65" benefits for decades. We predict as more people make plans to have longer careers the longer options will become more popular.

Graded Lifetime Benefits

Berkshire is one of few remaining disability insurance companies offering graded lifetime benefits. Rates for graded lifetime benefits are significantly higher in today’s market than they were just a few years ago. You can see less than 1% of the policies sold through our firm use this option. We believe it is just cost prohibitive to have this option.

Limited Benefit Periods

Some people do choose to have a limited benefit period. It is much less expensive to own a 2, 5, or 10-year benefit period than it is to own a benefit period to age 65 or longer. If you plan according to disability insurance statistics alone, a 5 or 10-year benefit period would cover the average length of a claim. It is also much riskier because if you were permanently disabled that would mean getting your last benefit check at 5 or 10 years instead of at your retirement age.

Other people who own a limited benefit period policy have it because the underwriter on the case limited their benefit period because of medical history preventing them from getting coverage to age 65 or longer. It may be because of a history of elevated cholesterol, mental and nervous history, or any other medical history which prevents an underwriter from offering full coverage.

Summary

One never knows if they will ever suffer a long-term disability, or what it is that might cause the disability. If we did, then we would know exactly what type of individual disability insurance policy to purchase. Since we don’t know, my recommendation is always to secure the longest benefit period you can afford. While you would look smart to have a 5-year benefit period policy if your disability lasted only 4.5 years, you wouldn’t look so intelligent if you owned a 5-year benefit period and were permanently disabled.

This material contains the current opinions of the author but not necessarily those of Guardian or its subsidiaries and such opinions are subject to change without notice.