Disability Insurance
"What Is Disability Insurance?"
This coverage is used when you are unable to work because of a disabling illness or injury. It is not designed to replace 100% of income, but rather, to pay 50 to 60 percent as an incentive to return to work.
"Why Is Disability Insurance Important?"
Like many healthy consumers, you likely believe that the risk that you will become disabled is … almost zero. And you could be right. It's hard to imagine doing what you do every day and now, because of an accident or illness, you can't. So the thought is, "If I'm not going to become disabled, how can it affect my family? Why then spend money on disability insurance?"
If you were disabled, can you imagine the consequences to those you invited into your life and promised to take care of? Without income you would have no choice but to rely on others. Are you comfortable with that? Would they be?
Since most healthy consumers believe they will not become disabled, we thought it might be useful to consider another perspective. If you woke up tomorrow morning and could not do what you always do to make a living, how would that make you feel? While that sounds like a simple question, feeling active and doing is the definition of wellness, so the thought of being disabled is not a pleasant prospect for anyone.
While you may be able to deal with the physical and/or psychological consequences yourself, what about the financial stresses that a disability would place on your family? Asking income to replace income that isn't there anymore is, in effect, double counting. To cope, your family will be forced to redirect and reduce expenses for everything it originally was allocated for to pay for the ones necessitated by your disability. Commitments your spouse and children had every right to expect you to fulfill are diminished, setting aside their lives to take care of yours.
The impact falls most heavily on your spouse who must now deal with all of the everyday problems caused by your disability, while at the same time maintaining a financial, physical and emotional connection to the family. That is a burden no spouse should have to accept. Disability coverage can help buffer both the financial and emotional pressures placed on your family.
"How Do I Know How Much I Need?"
This is a very important question because too little could have unforeseen consequences. Typically, a good benchmark is to ensure that you're replacing around 60 to 70 percent of your income in the event of a disability.
"When Should I Buy Disability Insurance"
You may feel as though the only time you would need coverage is when you're older. However, it's quite the opposite. Accidents can happen at any age and you may need to supplement coverage offered by your employer regardless of how old you are.
"What's the Difference Between Long-Term And Short-Term Disability."
Short-term coverage applies to an injury that temporarily impairs functionality. Short-term disability insurance will replace 60 to 70 percent of your salary until, if still disabled, you transfer to a long-term disability policy. The short-term coverage usually lasts for periods of up to three months but could extend up to 52 weeks.
"Are Disability Benefits Taxable?"
If you purchase your disability insurance policy with after-tax money then benefits are not taxable. If your employer pays the premiums then any paid benefits are taxable. If you share the cost with your employer, then a proportioned amount is taxable.
"Can the policy be cancelled?"
If you purchase a non-cancellable policy, the carrier cannot cancel it as long as you continue to pay your premiums.
"Is There A Difference Between Directly Verses An Agent?"
These policies have a number of moving parts, much of which can only be evaluated from a needs analysis—how much you need, what riders make sense and how much you can afford. In that regard, Agent Review recommends that you purchase this product from an agent who specializes in disability insurance.