Do you need disability insurance?
Last week we described some benefits and features of Long Term Care Insurance. Perhaps equally exciting is Disability Insurance. This type of insurance protects against a loss of income due to a disability. Although it is a tremendous source of frustration and seems to increase in price daily, most people have some type of health insurance. Life insurance can be quite inexpensive, making it easy to protect your family in the event of your death. But what happens if a serious illness or accident results in a long-term disability and makes it impossible for you to work. How do you pay for everyday living expenses?For those between the ages of 35 and 65, the risk of a disability lasting more than 90 days is one in four – six times the risk of dying. Becoming disabled can have disastrous financial consequences unless you have a long-term disability insurance that provides you with a replacement income.Many working people have some disability coverage through their employers, but it is often not enough. Many employer-paid policies only cover workplace-related injuries- so there would be no coverage if the disability occurred as a result of a car (or athletic) injury or a debilitating illness. In addition, these policies may have time limits as low as six months. A permanent disability would leave the individual unprotected. For those without any coverage – business owners, commission based workers, the self-employed – individual long-term disability policies are essential for protecting income. If you work for a living, disability insurance is as important as health or life insurance.Types of disability coverageThere are several variables that will impact how much you pay for disability insurance and what you will receive in return. Most policies define disability as the inability to perform the duties of your current occupation. Some less generous policies define disability as the inability to perform any work at all. (This would be Social Security’s definition, which makes that benefit very difficult to qualify for.)The amount of time the insurance will pay benefits is another important factor. You can decide whether you want to be covered for two to five years, or until you are age 65. Another consideration is the waiting period you choose when you apply for a policy. You can wait from one month to six months to begin receiving your benefits. Working with these variables allows you to customize your policy and perhaps keep premiums lower.The two most important factors in determining your premium are your income and your age. Disability policies generally pay out a percentage of your current income – anywhere from 50 percent to 80 percent. Some policies offer the option of automatic cost-of-living adjustments to help your disability payout keep up with inflation.The younger you are when you take out your disability policy, the less you’ll pay. Once you’ve passed your physical and have been accepted for coverage, you are guaranteed that the insurer cannot cancel your policy as long as you pay your premiums. Some policies offer premiums that never increase, with other policies, rates can go up over time.If you become disabled and begin receiving benefits, most policies no longer require you to pay premiums. Also, if you pay our own premiums with after-tax dollars, any disability payments you receive are tax-free. If you were insured through your employer’s group policy, you would pay taxes on your disability benefits.There are many variables involved in choosing disability coverage; you should consult a financial professional to ensure that the policy is right for you and your family or business.Jeffrey Apps and Tracy Tutag offer securities and investment advisory services through AXA Advisors, LLC. They can be reached at 926-6911 or firstname.lastname@example.org.Vail, Colorado
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