Protect your assets: the lowdown on property, liability, disability, auto, and office equipment policies - Special Guide to Insurance - includes related articles on how to find an agent, comparing insurance costs and organizations that rate insurance companies - Tutorial

Home Office Computing, March, 1994 by Linda Stern

Still, Peter Katt, a fee-only insurance consultant from West Bloom field, Michigan, asserts that the people who buy disability insurance the most--doctors, lawyers, accountants, physicians, and dentists-have less than a 1 in 20 chance of ever being disabled for even 60 days during their careers. But disability policies are sold with much more threatening statistics. One disability company brochure that Katt reviewed (but declined to name) warus of a 50-50 chance of long-term disability. Those people most likely to become disabled, notes Katt, such as farmers or construction workers, seldom can find disability insurance at any price.

Nevertheless, the unlikely could happen, and if you'd rest easier knowing that your income stream is protected, buy a disability policy. Just make sure it's a good policy, by considering the following.

Benefit period. This is the period of time the insurance must pay. Typical are five years, to age 65, or lifetime. Katt suggests lifetime benefits for accidents (which may disable you without shortening your life span) and until 65 for illnesses if you believe Social Security will pick up where disability lets off.

Waiting period. This is the time between the onset of the disability and when payments start. Like any other deductible, the more you cover or the longer the waiting period, the lower the premiums. For most young professionals, notes Katt, a 90-day period is a good compromise between accessing benefits earlier and lower premiums.

Residual benefit. This pays a partial benefit when the insured is not totally disabled. This is absolutely crucial, says Katt. Workers who become partially disabled and can work part time or in some other limited capacity, call upon residual benefits to make up the difference between what they can make now and what they would have made working full time.

Own occupation. With an own-occupation clause, you can't be forced to take a job in another field when illness or injury shut you out of your own. It's worth about a 10 percent markup on your policy's premium, says Katt, who is unlike many other insurance consultants in that he's not totally taken with this clause. He says, "You receive your full disability benefit regardless of your income from another occupation." Other experts encourage their clients to get this clause.

Cost of living. This rider ensures that your disability benefits will rise with the inflation rate.

A final word of caution about disability insurance. If you are incorporated, you may deduct your premiums. But taking this deduction now will force taxation of all benefits you receive under the policy, when you might be less able to swing the taxes. "Forgo this deduction," suggests Katt.

Auto Insurance Chances are, if you're running a brief errand, rarely use your car for business, or run into a telephone pole that wasn't there yesterday, your existing auto insurance will cover you at no additional charge. But why take a chance? Many auto policies specifically exclude business-related use of your car. However, Neville says, "if you use your car regularly for work-related reasons, the insurance company is entitled to a higher rate for business use--like maybe $100 per year, sometimes not even that much. The main thing to remember is to have enough liability coverage on your car and make sure your $1 million-or-more umbrella policy covers above the basics for both your car and homeowner's business-pursuits insurance."