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Disability Insurance:­ How will you cover your income?

April 05, 2023

A long-term disability could destroy your financial security. Don’t let that happen. Find out how disability income insurance can help.

Statistics show that over their working lives many American workers will suffer a disability that could potentially wipe out their retirement savings, deplete family emergency funds, and/or require the sale of assets such as the family home.

And, regardless of your profession, career, or business, the fact that a long-term disability might destroy your financial security can be a daunting realization. The most troubling part of disability is that the family or loved ones of the disabled person might be relying completely on the disabled person's ability to earn the income necessary to pay all of the monthly bills, rent or mortgage, car payments, and put food on the table.

There is also another component to the loss of income for the disabled person and that addresses the need for additional care and rehabilitation.

The time to consider disability income insurance is when you're young, healthy, and able to qualify for the coverage by passing the medical part of the application process. In addition, like most insurance that covers the person, disability income insurance premiums are lower for younger individuals than for older individuals.

The premium cost of disability income insurance is governed by several factors. The first step is to chose an income amount that will cover your monthly expenses and also fit the percentage allowed by the insurance company, generally a maximum of 75% of your income. Next, chose a waiting period that will need to be met before benefits are paid, something like three to six months. Then consider how long benefits will be paid i.e. age 65 or life. The sooner you chose to start receiving benefits and the longer you receive them will govern the premiums you pay.

Disability income insurance is designed to cover the time when you are unable to perform the duties of your career or profession as a result of illness or injury (non work related - that would be covered by workers compensation).

Analyzing your need and structuring disability insurance policy benefits requires some evaluation and knowledge about the insurance company's underwriting process. It's best to seek competent advice before you do it on your own.