Q. My boss offers disability insurance that pays 60 percent of salary for $35 per week. How can I decide if it’s worth it? Or should I shop separately?
A. Determining whether a disability policy is “worth it” is complicated.
“Life insurance is simple. For life insurance, if you can’t fog a mirror, someone gets a check and it’s not you,” said Jerry Lynch, a certified financial planner with JFL Total Wealth Management in Boonton. “Disability varies tremendously so the detailed wording on the contract will dictate if a contract is good or bad.”
Here are some items to consider.
First, the definition of disability.
Is it based on your ability to perform your own occupation, any reasonable occupation based upon training and education or any occupation?
“`Any occupation’ would mean that even if you are the CEO of IBM, if you choose not to flip burgers at McDonalds, you do not get a check,” Lynch said.
You should also see how long mental health issues would be covered, and what specifically is excluded from the policy, he said.
Also find out what coverage there would or wouldn’t be if you come back to work part-time and your income is substantially reduced.
Lynch said you also need to see if the rates and benefits are guaranteed or if they can change over time.
He said a small difference in the wording can make a very big difference is terms of if you’re covered, for how much and for how long.
Also see if the benefits of the policy would be tax-free.
“My advice is to speak to a good licensed insurance agent and have them walk through this based upon the specifics of the policy,” Lynch said.
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