Yesterday, we touched on a few of the reasons why you should probably be carrying long-term disability insurance.  If you aren’t either maintaining or shopping for a policy, I invite you to revisit the justifications for disability coverage.

Now let’s look at a few factors to consider when shopping for disability insurance.  This isn’t a comprehensive shopping guide, it’s just a few key considerations to ponder when making an insurance buy.

SECURING “OWN OCC” COVERAGE. Disability insurance comes in a few different forms.  Some policies will provide benefits only when you’re completely unable to work.  If you can perform any occupation, you won’t get benefits.  This is known as “any occ” coverage.  Others will pay when you’re unable to maintain your current occupation.  This is an “own occ” policy and it’s usually the best option for anyone making a decent wage or engaged in a professional occupation.

“Own occ” coverage is costlier than “any occ” options, but for a very good reason.  Let’s say you’re a right-handed heart surgeon and you get into a car accident that leaves your right hand mangled.  An “any occ” policy won’t help you out because you could go back into the workforce in a variety of non-surgical jobs.  An “own occ” policy, on the other hand, will continue to pay as long as you’re under a physician’s care.

If total “own occ” insurance is cost-prohibitive for you, there is an alternative.  You can purchase a hybrid policy that will perform initially as “own occ” before transitioning into “any occ”.  This approach, outlined by Eric Schurenberg, splits ”the definition…paying benefits under own-occ rules for the first one to five years of a disability and under any-occ rules thereafter.”

Also note that there is a fine line distinction between “true own occ” and “modified own occ” coverage.  I’m an advocate of “true own occ” policies.

HANDLING ELIMINATION PERIODS. An elimination period is the length of time that will pass following the onset of one’s inability to work and the beginning of disability payments.  At first glance, you might think that the best idea is to keep your elimination period to a minimum.  After all, the idea of getting benefits quickly in the case of a disabling condition is obviously attractive.  However, it may make sense to adopt a longer elimination period.

That’s because lengthening your elimination period is one of the easiest ways to decrease the premium cost of disability insurance.  Disability insurance is beneficial, but it can be relatively expensive.  This one area where you have some control over cost.

If you have relatively substantial resources and/or emergency funds, consider whether it might make sense to rely on these for awhile before benefits begin.  If that is possible, you can lengthen your elimination period and save money on long-term disability insurance.

PROVIDER AND POLICY QUALITY. Although I’m sure there are a few million insurance agents out there who’d disagree with me, there are times when all you really need is a cheap insurance policy.  In some circumstances, you can compromise quality for the sake of price.  I believe that renter’s insurance mandated as a term in a lease is a perfect example.  You may not really need the coverage, so it makes sense to buy the required minimum as inexpensively as possible.

Long-term disability insurance, however, is not an area in which it makes sense to skimp on quality.  You can expect to pay between 1% and 4% of your income for a good policy.  That might seem high, but when you look at the disastrous consequences that can come from inadequate coverage and the likelihood of actually using the policy, it’s really a decent bargain.

That’s only true, however, if you can actually get your benefits and enough of them.  That means that you’ll need to shop for a quality policy from a reputable provider.  Do your homework.  Some companies seem hellbent on finding ways to disapprove claims and others are known to offer questionable customer service.  This is not a time to skip the fine print or to roll the dice in order to save a few bucks every month.

Take your time.  Do your research.  Ask questions.  Read the policy.  Long term disability insurance is an investment that you should take just as seriously as you would if you were putting 1% to 3% of your income into a stock purchase.