Choices You Can Make to Control the Final Price
Elimination Period
Your elimination period is best thought of as the deductible on your policy. It is the time from the onset of your sickness or injury until you are eligible to start receiving your monthly benefits. You have the choice of a 30 day, 60 days, 90 days (most common), 180 days, or a 365 day elimination period. The longer your elimination period is, the less expensive your policy will be. With a shorter elimination period, you would qualify for more claims, so the insurance company will charge you more for the policy. The vast number of policies are sold within a 90-day elimination period. Still, every person should understand that changing this option will have a significant impact on the final price of your policy.
Benefit Period
This is another choice you will have to make when you buy your disability insurance contract. It is the time that you can receive your benefits while on a claim. There are several options: two years, five years, ten years, To Age 65, To Age 67, To Age 70, or the X45 Graded Lifetime Extension Benefit. The longer the benefit period you choose, the more expensive the final policy will be. A benefit period of two years does not mean that the policy you buy is only good for the "next two years." It means that if or when you become disabled, the policy will pay you benefits for up to 2 years. Going with a shorter benefit period will cost you much less, but you have to understand that you are running the risk of becoming permanently disabled and getting a final check at the end of a 2, 5, or 10-year period of time.
Optional Riders1
This is the one area where you will have to make many choices with your agent. We do offer an article for optional disability insurance riders that shows you what percentage of our clients choose every optional rider offered. It will show you that most of our clients purchase the Enhanced Partial Disability Benefit Rider, and there are many reasons for this.
If you consider it, people buy disability insurance to protect their income. That specific rider offers so many benefits that our office highly recommends no policy be sold without it. However, there are multiple other riders offered that can be added or removed, which will also have a significant impact on the final disability insurance cost. Take some time to review the article we provided a link to above to understand more about which optional riders you would want to have on your policy. Our agents will also help you understand each rider's impact on you in terms of benefits and price.
Premium Structure
When you buy a policy, this is a relatively simple decision. You can choose a level or graded premium structure.
A level premium structure means the price you pay when you buy the contract today will be the same price every year you own the policy. Rates will never change, which is one of the best aspects of purchasing a personal policy today while you are the youngest you will ever be. If you bought a disability insurance policy at 32 with a level premium structure, you would pay rates based on a 32-year-old for as long as you owned the policy.
The other choice is the graded premium structure, which is initially much less expensive than a level premium, but the price goes up every year you own the policy. Younger professionals tend to buy a graded premium structure disability insurance policy while money is tight, but we recommend that you convert this to a level premium policy as soon as you can lock in your rates. Graded premium disability insurance policies are prevalent with resident physicians.
Benefit Amount
This area needs to be clarified among people buying for the first time. Individually-owned policies do not work on percentages of income; instead, you purchase a specific monthly benefit amount. The amount you can buy is determined by each insurance company's issue and participation limits. They have a chart that shows the maximum monthly benefit a person can buy based on income level. That does not mean you must buy the maximum amount you are eligible for. You can purchase as little as $500 a month if that is what you want or need.
We would suggest purchasing the maximum level you qualify for and can afford. Disability insurance is the most important financial services product anybody can own. Your ability to earn an income is your most valuable asset, and disability insurance is the one product that protects this asset. Having said that, if you need to reduce your overall cost, the monthly benefit will significantly impact your price.
Type of Coverage
Berkshire Life offers the Provider Choice disability insurance product line. As a consumer, you can choose the Premier, Select, or Essential product offerings. The Premier is the most comprehensive level of coverage you can own, the Select is a product that will solve the need for income protection for most people, and the Essential provides fundamental income protection.
Look at it this way: Imagine you were offered two identical jobs. One paid you $150,000 a year while you worked, but nothing if you were sick or hurt. The other paid you $147,000 a year and 60% of your income tax-free if you were ever disabled until you reached 65 or recovered. Which would you take?
If you would take the second option, then you understand the value of individual disability insurance. On average, you can expect to pay between 1-3% of your annual income for a high-quality policy. Still, as you can see from the information above, there are many choices you can make to have a significant impact on the final price of your contract. The proposals we send you will show you all of your options, so make sure you spend some time with your assigned agent on the phone to design a policy that fits your needs and budget.
