From time to time, life events will cause you to re-evaluate your disability insurance coverage.
Having a child, getting married, buying a home, changing jobs and planning for college are just a few examples. This section examines some of the most common events that may trigger the need to reassess your disability insurance needs.
Changes at Work
If you work for a company that provides its employees with group disability insurance, benefits typically replace a fixed percentage of your salary, say, 50%. So if you get a raise, your disability benefit will automatically adjust upward. If you’re fairly well compensated already and your income places you at your company’s maximum monthly cap for disability payments, often set around $4,000 or $5,000, this would be an exception. If you get a raise and you’re concerned about the loss of income that would occur if you were to become disabled, you can seek to supplement your group coverage with an individually purchased policy.
Changes at Home
The need to protect your income with disability insurance becomes even more pronounced when other people are dependent on that income, like your spouse, newborn child or an elderly parent. Every time there’s a change in your family situation, take a minute to consider whether that change should trigger a reevaluation of your disability insurance needs.
Buying a Home
Consider increasing your disability insurance coverage to keep pace with the way your family is accustomed to living. When you buy individual coverage, it sometimes makes sense to pay extra for a Future Purchase Option rider. This provision ensures that health issues that may have arisen since you purchased your policy won’t prevent you from increasing your coverage.
You’ll also want to consider buying individual disability income insurance, or increasing existing coverage, every time you assume a significant amount of new debt. The bills won’t stop just because you’ve been in an accident and are unable to work for a period of time. You’ll need a source of replacement income to make sure that you’ll still be able to make your mortgage or car loan payments.