A:

Disability insurance policies are designed to partially replace your income in the event that you become disabled and cannot continue to work. To help limit the amount of fraudulent disability claims, it is not feasible for the insurer to replace 100% of the income that is lost due to disability. Because of this, most insurance companies will only cover up to 60% of the earned income of the insured. Depending on your profession, there are special cases where insurance companies have made exceptions for certain professions, such as interns, residents, fellows and physicians, which allows a policy to have coverage in excess of the 60% threshold.

Disability insurance policies for professions under the "special limits" mentioned above, typically have a guaranteed level premium cost up until age 65. If you're looking to save money on premiums, maybe because you are new to your profession and not yet earning the "big bucks", you can get what's called a "graded premium" disability insurance. This type of policy has the same benefits as level premium policies but the premium starts lower and increases each year. With a graded premium disability insurance policy, you'll get a low-cost policy with a high level of insurance coverage while guaranteeing your insurability for future years. This is a good low-cost option that helps recent graduates get disability coverage while allowing them time to get established, at which point a decision can be made to find a better policy with level premiums.

Learn more about this topic in our related articles: The Disability Insurance Policy: Now In English and Protecting Your Income Source.

This question was answered by Steven Merkel.

RELATED FAQS
  1. What's the difference between casualty insurance and disability insurance?

    Casualty insurance is often called "property casualty insurance", and it provides insurance protection for your property ... Read Answer >>
  2. What are some examples of industries that practice price discrimination?

    Understand the various types of insurance coverage offered in the insurance marketplace, and learn why each policy should ... Read Answer >>
  3. What is disability-income insurance?

    Disability-income insurance is insurance that provides financial benefits to a policyholder in the event of sickness or injury ... Read Answer >>
  4. Are my Social Security disability benefits taxable?

    Understand in which situations your Social Security disability benefits are taxable, as well as which states impose state ... Read Answer >>
  5. What are the maximum Social Security disability benefits?

    Find out the maximum Social Security disability benefits for qualifying individuals and couples in 2015, including who is ... Read Answer >>
  6. Which insurance policies do I really need?

    Your needs for insurance depend on your situation and can't be generalized for everyone, but there are a lot of options available. ... Read Answer >>
Related Articles
  1. Professionals

    Disability Insurance

    Disability Insurance
  2. Insurance

    Tips for Insuring Your Salary

    Those with high incomes really can’t afford to be without disability insurance. Here's why.
  3. Options & Futures

    The Disability Insurance Policy: Now In English

    Learn to translate this complicated policy so you can rest assured you're covered.
  4. Investing

    Advising FAs: Explaining Disability Insurance to a Client

    Disability is a very critical type of insurance that most individuals should consider carrying. When it comes to your personal finances, long-term disability can have a devastating effect if ...
  5. Professionals

    Group Disability Insurance

    Group Disability Insurance
  6. Home & Auto

    Intro To Insurance: Disability Insurance

    By Cathy ParetoAside from health insurance, disability is a very critical type of insurance individuals should consider having. When it comes to your personal finances, long-term disability can ...
  7. Professionals

    Benefit Amounts

    Benefit Amounts
  8. Professionals

    Disability Income Insurance

    Disability Income Insurance
  9. Personal Finance

    Disability and Business Overhead Coverage for the Self-Employed

    What every small business owner or professional needs to know about individual and business overhead disability income insurance plans.
  10. Professionals

    Evaluating Disability and Health Risks

    Evaluating Disability and Health Risks
RELATED TERMS
  1. Waiver Of Premium For Disability

    A provision in an insurance policy that states that the insurance ...
  2. Any-Occupation Policy

    A term used in the insurance industry to refer to a specific ...
  3. Disability Insurance

    A program managed by the Social Security Administration that ...
  4. Noncancellable Insurance Policy

    A life or disability insurance policy that an insurance company ...
  5. Total Permanent Disability (TPD)

    A condition in which an individual is no longer able to work ...
  6. Disability Insurance Trust Fund

    An account within the Social Security Trust Fund used to pay ...

You May Also Like

Trading Center