What Benefits Should I Look For in a Long Term Disability Plan?

As Dave Ramsey says, your greatest asset is your ability to earn an income.  So what do you do when you’re sick or injured and can’t work?  That’s where long-term disability coverage comes in.  If you’re just starting to look for long-term disability insurance, first see if you have access to a group plan through your employer. Group plans are typically less expensive and easier to qualify for than if you were to purchase long-term disability insurance on your own.

If a group plan isn’t offered, or you’d prefer to have an individual policy, Dave Ramsey recommends at least a five-year benefit period (the amount of time you would receive your benefit), since most disabilities are resolved within five years.  However, if it fits within your budget, a benefit period that lasts until age 65 would be ideal. 

Once you have determined the appropriate benefit period, you’ll need to choose your coverage amount. Dave recommends starting with an amount equal to 60% of your monthly income, which can be reduced over time based on how far you’ve come with attacking debt and growing your savings. To make your policy more affordable, choose an elimination period (the amount of time you must wait to begin receiving the payments) between 90 and 180 days – your emergency fund should cover your expenses until the benefit kicks in.

Be wary of additional riders to these plans, as they don’t typically add much value and only serve to drive up the cost.  Focus your search on the basics – a quality, renewable plan through a reputable company.