There's no question that once you've found a policy that offers all the important features you need, the cost of the policy becomes a major consideration. But another consideration that is equally important is the claims-paying ability of the company. Make sure the insurance company has the financial strength to make payments as long as you're disabled.

Look for companies that are well known for their line of comprehensive individual disability policies. The companies should be rated highly by rating services such as AM Best, Standard & Poor's, Moody's, and Duff & Phelps.

It's important that you understand what the ratings mean. Each of the rating companies has its own classification system for evaluating the claims-paying ability of an insurance company.

Policy Riders

In addition to the basic policy, disability insurance can be purchased with add-on features called "policy riders."

What You Need ... What You Don't

In addition to the basic policy, disability insurance can be purchased with add-on features called policy riders. Most riders are expensive and may not be worth the extra cost. Remember, basic transportation is what's important. You're better off putting money into your retirement plans than adding frills to your disability program.

Disability policies are issued in two basic forms: Non-cancelable and Guaranteed Renewable.

• A non-cancelable policy cannot be canceled and the premium cannot be changed prior to its next due date.
• A guaranteed renewable policy cannot be canceled before a specified age. The premiums can be changed if all policyholders in your occupational class or state are raised.

The best type of policy is one that is both non-cancelable and guaranteed renewable. Your policy cannot be canceled and the premium remains fixed until you reach a specified age.

Here is a list of provisions and riders that may be available depending on the policy you purchase.

Group Association Policies Can Save You Money

If you belong to an alumni, fraternal, or professional association, call the association's benefits administrator to see if they offer disability coverage. Since disability insurance offered through an association is written on a group basis, the rates are less than those for an individual policy. However, their underwriting requirements may be less flexible since they are dealing with large numbers of people. If you have any pre-existing conditions, you may be ineligible for coverage.

Many group policies have similar features to an individual policy. Here are some differences:

• Group policies may have more restrictive definitions of disability or may offer shorter benefit periods. Only take a five-year benefit period if you can't get one that pays until age 65.
• Group policy premiums go up every few years.
• Some individual policies are issued as non-cancelable, guaranteed renewable depending on your occupational classification. The rates remain fixed and the policy can't be canceled as long as you pay the premium.
• Group policies can be terminated. If you've developed a medical condition after enrolling in your group association plan and the insurer terminates the association plan, the association's new insurer may 1) not pick you up, or 2) may exclude any disability resulting from the medical condition.