Individual disability policies allow you to choose a benefit period. This is the length of time the policy would pay when you are on claim. The longer the benefit period, the more expensive the policy.
1) Lifetime policies. Most lifetime policies have reduced benefits if you become disabled after age 45. If you become disabled prior to age 65, the policy would pay full benefits until age 65 and thereafter for the rest of your life. For each year after age 45, there is a reduction of benefits at age 65 by 5%. For example, if you are disabled at age 46, you would receive full benefits to age 65 and then 5% less, or 95% benefit for the rest of your life. Premium rates for lifetime policies have increased significantly in recent years.
2) Age 67. These policies would pay benefits until you reach age 67. This correlates with the age some people would start to receive Social Security benefits. This is a common choice, especially for younger people who are looking to protect their full potential working years.
3) Age 65. The rates for an age 65 policy are slightly less than rates for an age 67 policy. Some people choose age 65 if they will receive Social Security at age 65 or if they will have access to their retirement funds at that time.
4) 10 years. A few companies will allow you to purchase a 10 year benefit period. This is a good option if you are in your 50s when purchasing your policy and you are looking to protect the next 10 years.
5) 5 year benefit. Some people choose a 5 year benefit if they are looking to protect a shorter period of time. This is a good option for people in their 50s who would potentially have access to their retirement plans in the near future. Others choose a 5 year benefit period to be able to have some coverage but to reduce the premium cost.
Before choosing your benefit period on your disability insurance policy, it is best to review your situation and see what best fits your needs and budget