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Understanding Waiting Periods

August 2, 2011

If you become disabled, you’ll have to wait a certain number of days before you are entitled to collect disability benefits. You choose the length of your waiting period when you purchase your individual disability income insurance policy. You’ll generally be offered a choice of waiting periods ranging from 30 to 720 days. You should base your decision on two factors: (1) how the waiting period affects the premium you pay, and (2) how long you could live off your savings without receiving disability benefits.

How does the waiting period you choose affect the premium you pay?

Like auto and health insurance deductibles, the longer the waiting period, the lower the premium. For example, a policy with a waiting period of 60 days costs more than one with a waiting period of 180 days–often substantially more. Why? Because statistically you’re more likely to recover andreturn to work within six months than within two months. So, the insurance company is more likely to have to pay a claim if your waiting period is shorter.
How long could you live off your savings without receiving disability benefits?

Before choosing a waiting period, you should think about how long you could live off your savings if you became disabled and were unable to work and earn a living. If you have a lot of money saved up or have other sources of income, you might want to choose a longer waiting period. On the other hand, if you have little or no money saved up and have no other income, you’d be wiser to choose a shorter waiting period.

After weighing the premium cost against the coverage you need, you should choose the shortest waiting period that you can afford. When you’re considering your options, keep in mind that in most cases you won’t receive an insurance payment until you are owed a month’s benefit. For example, a 90-day waiting period means that you will probably be out of work for 120 days before you receive any money. So if you choose a 90-day waiting period, you should have enough money saved up to support yourself for four months, not three.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of  The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com,  access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

The Retirement Group is a Registered Investment Advisor not affiliated with  FSC Securities and may be reached at www.theretirementgroup.com.

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