A disability insurance review doesn't need to take hours. These are the specific things to check, why each one matters, and what to do if something looks wrong.
Before you start, pull up your policy documents and your most recent pay stub. The whole review takes about 20 minutes. Set a yearly review reminder so you don't have to remember to do this again.
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Your policy pays a percentage of income at the time you bought it. If your salary has increased, the benefit may now cover less than you need. A policy bought at $60,000 income that pays 60% gives you $36,000. If you now earn $90,000, that same $36,000 covers only 40% of your income.
Own-occupation policies pay if you can't do your specific job. Any-occupation policies only pay if you can't do any job. Some policies start as own-occupation and switch to any-occupation after 2 years. Read the exact language.
This is how long you wait before benefits begin. Common choices are 30, 60, 90, or 180 days. Make sure your emergency fund can cover that gap. According to the Federal Reserve's 2023 Economic Well-Being report, 37% of adults can't cover a $400 emergency with cash.
Short-term policies typically pay for 3-6 months. Long-term policies may pay until age 65, age 67, or for a set number of years. Know when your benefits would stop.
Key riders to check: future increase option (add coverage without re-underwriting), cost-of-living adjustment (benefits increase with inflation), residual or partial disability (pays proportionally if you can work part-time). If you don't have these, ask if they can be added.
Most policies exclude pre-existing conditions for the first 12-24 months. Some exclude specific activities or self-inflicted injuries. Know what's not covered so there are no surprises at claim time.
Employer group plans often cap benefits at $5,000-$10,000 per month, use any-occupation definitions, and produce taxable benefits if the employer pays the premium. Run the actual numbers against your monthly expenses before assuming you're covered.
This checklist covers the policy itself. But the right coverage also depends on what's happening in your life. See life changes that require a disability insurance review for the specific events that should trigger a fresh look.
If your review reveals the policy is no longer worth keeping, here's how to decide whether to cancel.
A basic review takes 20-30 minutes if you have your policy documents handy. Pull up your most recent pay stub for income comparison and your policy summary page for benefit details.
Ramsey recommends disability insurance as essential financial protection, typically advising a benefit of 60-70% of income with an own-occupation definition. He suggests a longer elimination period (90-180 days) to keep premiums lower, covered by an emergency fund.
The elimination period is the waiting time between when a disability begins and when benefits start paying. Common options are 30, 60, 90, or 180 days. A longer elimination period lowers your premium but means more time without benefits.
Own-occupation pays if you cannot do your specific job. Any-occupation pays only if you cannot do any reasonable job. Specialists, surgeons, and high-skill professionals especially benefit from own-occupation coverage because their earning power is tied to a specific skill set.
Compare the monthly benefit to your current take-home pay, not your salary from when you bought the policy. Account for taxes (employer-paid premiums mean taxable benefits), essential monthly expenses, and any income your household would lose.
If your policy has a future increase option or guaranteed insurability rider, yes. These riders let you add coverage at specific life events without new underwriting. Check your policy or ask your agent.
You've done the review. Now make sure next year's happens too. Free, no account.
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