§The sole purpose of individual disability insurance is to replace your after-tax income in event of an accident or illness. These policies do not provide protection from medical expenses or recovery of damages for “pain and suffering”.

§Since benefit payments are designed to be income tax-free, insurance coverage in amount of 2/3 of your salary is roughly equivalent replacing your net take-home pay. This is usually maximum amount of insurance that you can purchase.

§Be prepared to show insurance company a pay-stub is you are salaried or an income tax return if you are self-employed to prove amount of insurable income.

§If you are self-employed, you can only insure amount of net income that you reported on your tax return, even though your actual earnings might be much higher. In this case, you might want to supplement your insurance with “business overhead coverage” that does not depend on net income.

§Expect insurance policy to exclude or limit coverage for pre-existing conditions. If you have a bad knee, for example, expect that your policy might have a 5 year rider on claims due to knee injuries.

§Most policies are issued for a term of five years of coverage, although you can buy a longer or shorter benefit amount.

§Most policies have a 90 day waiting period before you can begin collecting a benefit, but you can buy longer or shorter waiting periods.