What’s a fair price for disability insurance?

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Q. I recently switched jobs and my new one doesn’t offer disability insurance. I’m thinking of getting my own policy. How do I know how much I need and what a fair price would be?
— Getting ready to shop

A. Good for you that you recognize the need to protect your most valuable asset; your ability to earn an income.

If you think paying your bills are tough, just imagine how much tougher it would be with no income.

You’re correct that because your company doesn’t offer long-term disability protection, you would need to investigate your own options, said Ed Gaelick, .a Chartered Life Underwriter and Chartered Financial Consultant with PSI Consultants in Glen Rock.

So how do you know how much you need and what coverage should cost.

Gaelick said premiums are completely dependent on age, gender, occupation, smoking status, overall health and the amount of benefits chosen. It also matters how long you wait before benefits kick in, how long benefits are paid, whether you have chosen any options and the insurance carrier.

“There are variables that you can’t change, such as your age and gender, and some things that you can control, such as how much benefit you purchase, options and the insurance company chosen,” Gaelick said.

Gaelick said there is a maximum benefit you can qualify for based on your income, but you can certainly take less.

How much you need would be a function of your monthly expenses, he said.

“The options all have value but you can decide on none,” he said.

If you wait longer for benefits, premiums are lower.

“Ideally you should get as much benefits as you can but if there are budgetary constraints, something is better than nothing,” he said.

And while premiums are important, the contract’s definition is equally as important.

“So what is `a fair price’ is relative as related to the benefits and contract language,” Gaelick said. “It can get confusing so it is best to consult with an insurance broker experienced with the disability insurance market so you design a plan within your budget and chose the most ideal carrier for your circumstances.”

Here’s more about the specifics of each policy so you can be prepared when you meet with an agent.

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