What is Disability Insurance?
Disability Insurance is the industry name for a plan that provides for periodic payments of benefits when a disabled insured is unable to work. The insurance product is designed to replace anywhere from 45 to 65% of your gross income on a tax-free basis should illness keep you from earning an income in your occupation.
If you’re unable to work due to a sickness or injury, Disability Insurance can help cover your essential living expenses. It can help you pay bills like your mortgage, tuition and car payments, and help cover expenses for food, clothing and utilities. By replacing a portion of your income, Disability Insurance can help protect your financial security until you get back on your feet and return to work. It does not: Cover medical care or long-term care services.
10 Essentials of Disability Insurance
1. If you or others depend on your income — you need it.
If you have people who depend on your income – or if you depend on your income – you need disability insurance. You might be surprised to learn that social security benefits are not available if you are expected to be out of work for less than a year. One year without income could deplete your savings and have a significant impact on your finances.
2. Disability insurance replaces a portion of your income when you can’t work.
If you were unable to work due to illness or injury, disability insurance can help to pay your most essential expenses, including food, utilities, school tuition, home and car payments.
3. Most long-term absences are due to illnesses, not accidents.
While many people think that disabilities are typically caused by accidents, the majority of long-term absences are actually due to illness.
4. You need it even if you’re young and healthy.
Almost 1 in 4 of today’s 20 year-olds will become disabled before reaching age 67. What’s more, it’s easier and less expensive to get disability insurance when you’re young and healthy.
5. The risk of a disability during your working years may be greater than you think.
The risk of suffering a disabling illness or injury may be more likely than you realize. In fact, the average 20 year old is more likely to become disabled than to die before age 67. Disability insurance helps you maintain a steady stream of income when you can’t work due to illness or injury.
6. A good rule of thumb is to protect 60-80% of your after-tax income.
You will need to meet your essential living expenses if you should become disabled. 72% of consumer expenditures cover essential needs like housing, food, transportation, health care and education. This easy-to-use Disability Needs Calculator can help determine what amount of disability insurance is most appropriate for your situation.
7. Some disability insurance is better than no disability insurance.
When budgets are especially tight, it still makes sense to buy enough disability insurance to cover rent or mortgage payments and keep your family in their home should you become disabled. Disability insurance is more affordable than you may think. For example, a healthy 35 year-old male may obtain a $1,000 monthly benefit for an initial premium of approximately $25 per month.
8. Make sure you know how much disability insurance you get at work.
Check to see if disability coverage is made available to you through your employee benefits package. You might want to look carefully at coverage, however, since group benefits alone may not be enough due to potential benefit limitations and types of income covered.
9. There is no substitute for good advice.
Seek advice on how much insurance is right for your needs. Talk to a trained financial professional or perform research online. Whichever approach works best for you, taking action to protect you and your family with disability insurance is an important part of a strong financial plan.
10. The financial strength and reputation of the company you buy from matters.
When you purchase disbility insurance, the company you buy from is making a long-term commitment to you. If you become disabled, there is a chance you will receive benefits for an extended period of time, so it makes sense to buy from a company with experience, financial strength and a solid reputation.
If you have any questions on polices or have additional questions before get a free quote, please contact our offices today.
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