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Disability Insurance Glossary of Terms

When buying disability insurance you should make sure you are familiar with the terminology used so that you can make the right decisions - just like when you buy any other insurance - or anything for that matter!

Benefit Period - This refers to how long you will get the benefits from the insurance. The longer the time period, the more the insurance will cost. Common periods offered in disability policies are two or five year, until you are 65 or for the rest of your life.

COLA (Cost Of Living Adjustment) - In many policies this is an option. Basically it takes into account an increase in the cost of living over time. This would be very important to have if you are going to buy a until you are 65 policy or a lifetime policy, as the cost of living will most certainly rise during that time, unless maybe you are fairly close to age 65 already.

Commencement Date - The first day after the elimination period is over that you can get your benefits.

Elimination Period - This works kind of like a deductible. It is the time or waiting period from when you are disabled until you actually start getting checks from the insurance company. Similarly to a deductible, the longer you area willing to wait until you start getting paid, the lower your insurance payments will be. Typically elimination periods are 30, 60, 90 or 180 days. So, depending upon how much money you have on hand at any time - enough for a month, two months, etc. - will determine how much of a waiting period you want for your policy. Also, keep in mind that it will take a while to actually get the check in your hand. So if you really only have two months of money on hand to pay bills with, you should probably go ahead and get the 30 waiting period, because you won't get the check right after 30 days - it may be closer to the 60 days when you will be running out of money.

Future Purchase Option - This option in a policy will allow you to increase the amount of coverage you have after a period of some number of years. This will cost a bit more, but may help you sleep better at night if you end up having more kids or some other expenses you hadn't anticipated.

Guaranteed Renewable - With this option the insurance company can raise its rates, but cannot single you out and raise just your rates.

Noncancelable Renewable - In this option your rates won't get raise until age 65.

Total Disability - This is when someone cannot do any of the things he needs to do for his job or any job. If your insurance only covers total disability - if you are able to work even a little bit - you won't get anything from your insurance.

Own Occupation Protection - This has to do with how long you will get paid through your disability insurance if you can't do the type of job you went to school for, but can still do something else. This would be important for people will very specific skills, that if you lost them, like your eyesight or dexterity with fingers if you are a surgeon, where you wouldn't be able to do something that would have paid you really well. It is expensive though, so really only practical if your income is really high.

Presumptive Total Disability - Some types disabilities are considered total disabilities such as, blindness, loss of speech, hearing, hands, feet.

Residual Disability - This means you will get some coverage even if you can work a little. As a possible example, if you can only work one day a week, you'll still get some benefits from your insurance.

Waiver of Premiums - This means not having to pay the premiums (insurance payments) after you have been disabled for some time.

Want to learn more? See Part 1: Disability Insurance - What is it and Why in the World Should Any Woman Care? and Part 3 to learn more about where you can get disability insurance from and what to look for in a policy.

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