Is 2-year disability insurance long enough?

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Dear Insurance Adviser,
I currently have a disability insurance policy that will cover me for two years if I get disabled (knock on wood). I decided to apply to another disability insurance company, and I’ve been approved, but have not started payment.

The second policy has a feature that increases the insurance amount every 10 years, and it starts out about 50 percent cheaper than my current policy. Which one would be the better way to go? Should I stick with my current policy, knowing that I can be disabled at any time and that I would be covered for only two years? I cannot afford both policies, and my husband even hates the idea of getting any disability insurance.

Would appreciate your input.
— Sam

Dear Sam,
You mentioned that your current policy pays disability benefits for two years, but you don’t mention the payout length of the new policy. The usual options are five years or to age 65.

You haven’t given enough information for me to definitively make a recommendation to you. I can say that I would discourage you from having a policy that pays out for only two years, unless you have no other alternative.

What I will do is tell you what features a good disability policy contains and encourage you to try and get as many of those features in your new policy as you can.

  • Coverage length: At least five years, ideally to age 65.
  • Renewability: Guaranteed renewable to age 65 or Social Security retirement age.
  • Disabilities covered: Both total disability and prorated, or adjusted, partial disability (also known as “residual disability”).
  • Future purchase options: The ability to increase your coverage, regardless of current health.
  • Cost-of-living adjustment (COLA): Feature making it possible for you to receive monthly benefits that increase with inflation.
  • Adequate monthly benefit amount: An amount equal to your take-home pay or the maximum that insurance companies offer.

There is one other feature that I would consider important but not critical: a price guarantee on the insurance cost. I think it’s more important to spend your money on coverage rather than locking in the price because, historically, disability insurance companies rarely raise rates.

Good luck. I hope this helps.

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