DISABILITY INSURANCE:INSURING AGAINST LOSS OF INCOME
If you were disabled and unable to work as a result of an accident or illness, what would you and your family do for income?
Disability income insurance, which complements health insurance, can replace lost income. Forty-three percent of all people age 40 will have a long-term (lasting 90 days or more) disability event by age 65.
There are three basic ways to replace income:
1. Employer-paid Disability Insurance
This is required in most states. Most employers provide some short-term sick leave. Many larger employers provide long-term disability coverage as well, typically with benefits of up to 60 percent of salary lasting from five years to age 65, and in some cases extended for life.
2. Social Security Disability Benefits
This can be paid to workers whose disability is expected to last at least 12 months and is so severe that no gainful employment can be performed.
3. Individual disability income insurance policies
Other limited replacement income is available for workers under some circumstances from workers compensation (if the injury or illness is job-related), auto insurance (if disability results from an auto accident) and the Department of Veterans Affairs.
For most workers, even those with some employer-paid coverage, an individual disability income policy is the best way to ensure adequate income in the event of disability. When you buy a private disability income policy, you can expect to replace from 50% to 70% of income. Insurers won’t replace all your income because they want you to have an incentive to return to work. However, when you pay the premiums yourself, disability benefits are not taxed. (Benefits from employer-paid policies are subject to income tax.)
Data and information is provided for informational purposes only, and is not intended for any other commercial or non-commercial purposes. Neither David M. Kulawiak, Inc. nor any of its data or content providers shall be liable for any errors or delays in the content, or for any actions taken in reliance thereon. By accessing our web site, a user agrees not to redistribute the information found therein. We provide customized links to select companies for your convenience only. We do not endorse or recommend the services of any company. The company you select is solely responsible for its services to you, the user. We shall not be liable for any damages or costs of any type arising out of or in any way connected with your use of our services.