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Disability Insurance

Disability Insurance

When you mention insurance to people, the first thing that usually comes to mind is auto, health, home and life insurance. The type of insurance that many people don’t think about is disability insurance. You never know when your income will be deprived due to an accident or illness. Statistics show that your chances of being disabled for three months or longer during your working years are 3.5 times greater than your chances of dying during the same period.

Although some people are financially savvy, even they often overlook disability insurance. This could be because they feel covered by the benefits of their jobs. This coverage is inadequate for disability and should be taken into consideration during the financial planning of most individuals. Look at these things to get the right coverage for you:

Key policy terms. Make sure you understand how disability is defined. Whether or not you are fit for work following an illness or accident is determined by “any occupation”. When you cannot perform a job that you once held because you became disabled but you receive benefits, it is defined as “own occupation”.

The benefit period. Until your disability is covered by Medicare or Social Security, your policy should cover it.

How much coverage is needed? This is simple. Add up the income you will have from all sources during the period of disability after taxes, and subtract this number from your minimum needs.

What can you afford? Disability insurance is expensive, but it’s worth it in the end. Consider lengthening the elimination period, if your budget won’t support the ideal benefit payments. Your accumulated sick leave, savings, etc, may carry you until the benefits begin. For options available to you, speak with your insurance agent.

The Tax Shelter is here to help. Check out our services for Estates and Trusts.