Determining the best of anything is normally a subjective exercise. The best movie of the year. The best car to drive. The best toothpaste to use.
Whatever we seek to buy, Americans have abundant choices. There are also wide-ranging opinions on who offers the best choice among those options.
Ultimately, choosing a product or service comes down to individual preferences.
The same is true for disability insurance.
If you clicked on this article hoping to see a single choice for the best disability insurance company or policy, you won’t find it.
The truth is, the ideal choice depends on what you’re looking for, what you’re eligible for, and of course, your unique personal situation.
Just the roundabout answer you were hoping for, right?
We can, however, help you narrow down your options and offer advice on what to look for.
The best disability insurance companies have A ratings. And the best policy for you is the one that meets your unique financial needs by protecting as much of your income against as many potential injuries and illnesses as possible.
Dozens of companies offer disability insurance. You can whittle down the list and focus on a smaller number by looking at financial strength and Better Business Bureau (BBB) ratings.
If you ever need to file a claim for disability insurance, you need to know that the insurance company can provide benefits to replace the earnings you lost due to injury or illness. If the insurance company fails to meet its contractual obligations, the effect on you and/or your family could be catastrophic.
You are more likely to collect on your benefits if you purchase insurance from a company with superior financial ratings.
Rating agencies assess an insurer’s ability to meet its current and future obligations to policyholders. These ratings are based on an independent investigation of an insurer’s financial health. Once they’ve fully evaluated an insurer, the agencies assign a letter grade. Higher letter grades indicate better financial performance.
The agencies that rate insurance carriers and their top ratings include:
- A.M. Best: A++, A+, A, A-
- Fitch: AAA, AA+, AA, AA-, A+, A, A-
- Moody’s: Aaa, Aa1, Aa2, Aa3, A1, A2, A3
- Standard & Poor’s: AAA, AA+, AA, AA-, A+, A, A-
In addition to financial strength, you can also check the reputability of insurers based on their BBB rating.
BBB ratings represent the organization’s opinion of how the business is likely to interact with customers. Ratings are based on information BBB is able to obtain about the business, including complaints received from the public. BBB assigns ratings from A+ to F.
Below are 10 disability insurance companies that offer:
- An A++, A+, A, or A- financial strength rating from A.M. Best (the four highest ratings the firm awards); AND
- An A+ rating from the BBB (its highest designation).
This may not be the entire list of companies that possess both A ratings. There may also be examples of companies that possess one of the highest ratings from Fitch, Moody’s, or Standard & Poor’s. But based on experience, reputation, and name recognition, these 10 companies offer a good starting point for your search of the best disability insurance companies:
- Guardian Life Insurance Company of America is rated A++ by A.M. Best. It is one of the nation’s largest mutual insurers, which means it is owned by policyholders, not outside shareholders. The company’s long-term disability insurance policy offers a number of elimination periods and benefit periods. It also includes a true own-occupation definition of disability.
- MassMutual is one of the oldest insurers in the U.S., founded in 1851. It is also a policyholder-owned mutual insurer with an A++ financial rating from A.M. Best. The company’s long-term disability insurance policy offers several options for elimination and benefit periods. The base policy defines disability as Own Occupation not working. A True Own Occupation is available as an optional rider for an additional cost.
- Northwestern Mutual is rated A++ by A.M. Best. It was founded in 1859 and as a mutual insurer, it’s owned by policyholders. The company plans to pay out $6 billion in dividends in 2020. According to its website, it has the best client satisfaction among all individual life insurance providers as ranked by J.D. Power. The company includes disability policies for stay-at-home parents and part-time employees.
- Thrivent is a membership-owned fraternal organization founded in 1902 that is also a member of the Fortune 500. It is rated A++ by A.M. Best and serves more than 2 million clients. Thrivent was also named one of the “World’s Most Ethical Companies” by Ethisphere Institute.
- Mutual of Omaha was founded in 1909 and is rated A+ by A.M. Best. Its long-term disability policy offers a two-year Own Occupation, then it’s an Any Occupation. The company’s short-term disability offers a $5,000 monthly maximum benefit for up to two years. Its long-term policy offers a $12,000 monthly maximum benefit for up to 10 years or to age 67.
- Principal Financial Group is rated A+ by A.M. Best. The company’s long-term disability insurance policy offers several options for elimination and benefit periods. The base policy defines disability as Own Occupation not working. A True Own Occupation is available as an optional rider for an additional cost.
- RiverSource was founded in 1894 and rated A+ by A.M. Best. Its RiverSource Income Protection and Income Protection Plus offer guaranteed coverage up to age 65 and coverage for bonuses and commissions.
- Ameritas is a mutual insurance company that is rated A by A.M. Best. Its disability insurance policy gives you a choice of benefit and elimination periods. You can also decide when benefits begin and for how long they are payable. And you can choose between an Own Occupation or Own Occupation and Not Working definition.
- The Standard, founded in 1906, is one of the nation’s largest and best-respected disability insurance providers. There are a number of built-in benefits, elimination period, and benefit period options. The policy offers a Regular Occupation definition of disability, and you can get a True Own Occupation via an optional rider at extra cost.
- Assurity Life Insurance Company is rated A- by A.M. Best. Assurity's Century+ Individual Disability Income Insurance is a long-term policy with an Own Occupation definition of disability and a number of available riders. Waiting periods range from 30 to 365 days and benefit periods can last from 1 year all the way up to retirement age.
Short-term disability is typically for temporary, less serious injuries that limit the ability to work, but that people generally recover from.
If you qualify for short-term disability benefits, you will typically be reimbursed for about 60 percent of your lost wages. Depending on the policy, the benefit may be as low as 40 percent or as high as 70 percent. Most policies have a benefit cap as well.
The waiting period for when short-term disability benefits start paying is typically around 14 days. Benefits generally last around six months. Some may pay as long as two years.
Individual short-term disability isn’t a necessity for all. Many people have access to group coverage through their employers. Several companies even pay the full premium for their employees. A handful of states require employers to provide this coverage.
Long-term disability policies are designed to protect people from illness or injury that keep them out of work for an extended period. Benefits may last from five to 10 years, and some will pay up until the insured reaches age 65.
Even if you have group long-term disability insurance, you should strongly consider an individual policy.
About one in four American workers become disabled at some point in their working lives. If you rely solely on group insurance, you may lose that coverage if you are no longer employed by the company issuing your group insurance. Group policies also offer fewer coverage options than an individual policy that you can tailor to your needs.
There is no one best disability insurance company. Each individual has unique circumstances that dictate the right policy for them.
As you compare policies looking for the best long-term disability insurance, pay attention to:
- How does the policy define disability and how does that definition possibly affect your ability to qualify for benefits?
- Which carriers have an own-occupation provision. This states that the policy will pay benefits if an injury prevents you from working in your chosen profession, even if you’re well enough to earn an income doing other types of work. Also, consider which carriers make this provision part of the base policy and which offer it as an optional rider at extra cost.
- Whether other key features you need are part of the base policy or only available through an optional rider.
- Which optional benefits will you benefit from the most and which carriers offer those benefits? Examples include residual benefits, student loan riders, retirement protection, and critical illness benefits.
- Which occupational class your job falls with each carrier. Some policies will treat a certain job differently than others. For example, if two men of identical ages and in the same general health apply for the same amount of coverage with the same company, they may pay markedly different premium rates based on their job.
- The cost and availability of a cost-of-living adjustment benefit, which increases benefits based on inflation.
- The cost and availability of future benefit increases, which enable you to increase your benefit amount if your income increases, without additional underwriting.
- What is the maximum benefit period you need?
- What length of elimination period do you want on your policy?
- Which policies are available in your state? Some policies are not approved for sale in certain states and are therefore not available to those residents.
Because of the choices and complexity of finding the best disability insurance in 2020, people are advised to work with an independent licensed insurance agent.
This type of financial professional has access to policies from multiple carriers. This means they can assess your individual situation and find the best policy match within a number of options.
A reputable agent looking out for your best interests can also ensure your policy includes the features and options you need, and that you can find a policy within your budget.
Jack Wolstenholm is the head of content at Breeze.
The information and content provided herein is for educational purposes only, and should not be considered legal, tax, investment, or financial advice, recommendation, or endorsement. Breeze does not guarantee the accuracy, completeness, reliability or usefulness of any testimonials, opinions, advice, product or service offers, or other information provided here by third parties. Individuals are encouraged to seek advice from their own tax or legal counsel.