At some point in every person’s career, he or she will consider the option of purchasing Disability insurance. Unfortunately, most people will only become interested in purchasing Disability insurance after experiencing a health condition or witnessing a relative or friend who has experienced the financial and emotional impact of a disability. Aside from the difficulty most people have in believing that a disability will ever affect them, the cost of coverage also plays a role in why many people decide against purchasing coverage.
Luckily there are many alternatives available to help young professionals keep the cost of coverage affordable and allow them to put coverage in force while they are young and healthy. One of the best strategies for young professionals to use is the Graded premium schedule.
A Graded premium schedule can be found in many policies offered by the top Disability insurance carriers in today’s market. As its name implies, a Graded premium is structured to start with a low premium that will gradually increase every year. The idea behind purchasing a Graded premium policy is to keep premiums as affordable as possible for the first 2-7 years of a professional being in the work force. The savings is often substantial during the years it is needed most. Since the premium continues to increase each year, it is recommended that a person convert the Graded premium schedule to a Level premium schedule within the first 5-8 years of owning the policy – hopefully enough time to get established within one’s career and be capable of handling the higher premium.
The true benefit of purchasing a policy using the Graded premium, is to allow young adults with low to moderate incomes to obtain coverage at a time when they are likely to be the healthiest they will ever be. Generally a person is the healthiest between the ages of 25-35, which therefore allows purchasing Disability insurance to be much easier. A person in excellent health will have a much better chance of obtaining coverage without any exclusions or limitations for preexisting conditions.
Exclusions are a tool used by insurance companies which enable them to provide coverage to people who have existing medical conditions. Once you have already been diagnosed or treated for a specific condition by a health care professional, it is likely that the specific condition will be excluded from your Disability insurance contract. In other words, the policy will not pay benefits for a loss of income caused by the specific condition being excluded. Certainly a policy with one exclusion is better than not having a policy at all, but a policy that does not have any exclusions is clearly ideal.
By purchasing a Disability insurance policy using a Graded premium, a young adult can purchase a policy that normally may cost $100/month for only $20 or $30/month. This is substantially more affordable and therefore allows for more young professionals to put a policy in place to protect their future earnings.
One of the smartest things a person can do when purchasing Disability insurance, is find an insurance professional that specializes in Disability Insurance. Often referred to as Disability Income Specialists, advisors that focus on Disability insurance are more likely to be capable of helping you find the most appropriate coverage for your specific circumstances. Whether you are a young physician, accountant, engineer, sales professional or any other type of professional, it is important you think about your future and consider protecting your income with Disability insurance.
Specific to the Graded premium schedule option – ask your Disability insurance advisor whether the premiums are guaranteed. As this article has explained, there is great merit to using the Graded premium schedule but you do not want a policy that can increase by too much in any single year, as it would defeat the purpose. Guaranteed Graded premium schedules do exist and your Disability Income Specialist should be able to find one for you.