What is the maximum coverage for disability insurance?

The correct answer relates to the maximum coverage for disability insurance, which insurance regulators often set to ensure that policies remain effective without creating adverse selection. In many states, including Georgia, the maximum coverage limits for individual disability insurance policies are typically capped at $300,000 to balance risk and to ensure that policyholders can still receive enough benefits to support them during periods of disability.

This figure takes into account the need for continuation of income while recognizing the potential for moral hazard if coverage were set excessively high. Insurers assess what constitutes a reasonable level of coverage based on average income levels and the cost of living, ensuring that clients obtain sufficient financial protection without incentivizing a higher risk of moral hazard, where individuals might be less motivated to return to work if coverage is too generous.

Other options, such as $200,000, $400,000, or $500,000, do not align with these regulatory standards typically found across various states, including Georgia. Thus, $300,000 is recognized as a rigorous yet practical limit for maximum disability insurance coverage.