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Private Disability Income Insurance |
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What is private disability income insurance?
Private disability income insurance is insurance purchased through an insurance company that pays you a predetermined benefit when you are too sick or too injured to work. Private disability income insurance policies come in many forms: individual policies; group insurance policies sponsored by employers, trade associations and organizations; business protection policies; and riders on life insurance policies. More and more private disability policies are being sold as people realize that coverage provided by government-sponsored social insurance programs is limited in scope and often difficult to qualify for.
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Taxation of Disability Insurance Benefits and Premiums |
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What is it?
Like all income, the income you receive from disability insurance may or may not be taxable. The taxability of disability insurance benefits depends on what type of benefits you are receiving, whether the premiums were paid with pretax or after-tax dollars, and who paid the premiums--you or your employer.
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Ten Ways to Lower the Cost of Disability Income Insurance |
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What is it?
If you don't have disability income insurance because you can't afford the premiums, you should know that there are several strategies you can use to make disability coverage more affordable. These strategies include eliminating coverage you don't need, buying less than maximum coverage, and assuming more of the risk of funding your own disability. In general, you should follow two rules: (1) buy the best quality coverage you can afford, and (2) don't pay for what you don't need.
Example(s): When Ken's first child was born, he decided that it was time to buy disability insurance to protect the income needs of his growing family. He asked his insurance agent to quote him a price on a noncancelable policy that would pay him a $3,000 monthly benefit. The policy's elimination period was 60 days, and he could expect to receive benefits until he was age 65. To the base policy, Ken added a cost-of-living rider, a future benefits increase rider, and an automatic benefits increase rider. However, Ken was shocked when he saw how much he had to pay for such a policy. So, he settled on a policy that covered less than he wanted but was adequate for his needs: a guaranteed renewable policy that would pay him a $2,000 monthly benefit after a 90-day elimination period with no additional riders.
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What is Disability Income Protection? |
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While many people will purchase life insurance because they are worried about providing income in the event of an untimely death, more people need to be concerned with the risk of a disability.
Facts to think about:
- One in five Americans will experience a long-term disability during their working years.
- Disabilities lasting more than 90 days tend to last for many years.
- Every 30 seconds someone files for bankruptcy as a result of a serious medical problem.
- Among those whose illnesses led to bankruptcy, nearly 76% had medical insurance at the time of discovery of the illness.
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Disability Income for the Future |
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Take Ownership of Your Future!
Can you believe that according to some estimates one out of every ten persons will become permanently disabled before age 65? If you became that “one” and you could not perform your current job, what options would you have?
For most people this would be a financial tragedy, and unfortunately most rely solely on Social Security, or workmen’s compensation and unemployment insurance from their employers to cover any unexpected disability. The trend of relying solely on these forms of disability income coverage is unfortunate because the maximum benefits from these sources, in most cases, is very limited and most people would have to dramatically change their lifestyle to survive on these types of disability income alone. Considering a disability income insurance policy from your insurance agent is an alternative to consider for people who realize the risk of becoming disabled and want to protect their current income and standard of living.
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