Taxes & Insurance

Disability insurance can provide you with income if your earnings are reduced by illness or injury. However, disability policies are expensive. If you want to cut costs yet still retain needed protection, consider one or more of these tactics:

* Extend the waiting period. Stipulate that your benefits won’t start until you’ve been disabled for six months or one year. The longer you wait, the lower your premiums. You might take this step if you have ample cash reserves.

* Reduce the benefit. You might like to receive, say, $5,000 a month if you’re disabled. A policy that pays, say, $3,000 a month will be less expensive. With that $3,000 a month, you might be able to cover your basic living expenses.

* Reduce the benefit period. Most disability policies will pay until you reach age 65. A policy that pays for no more than five years will cost less.

* Let riders “dismount.” Many people selling disability insurance will urge you to add optional riders. Some options are valuable but they add to the cost. You probably can do without riders that pay extra in case of accidents or if you need to be hospitalized. You also might consider doing without a rider that adjusts your benefits to keep pace with inflation or a rider that will pay benefits for “residual” (partial) disability.