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Disability Insurance Learning Center Disability income can help protect your most valuable asset, your ability to earn a living. When you can't work, it can help you and your family:
Disability income insurance provides a monthly benefit for loss of income because of covered injuries or illnesses. After a predetermined time period, it typically pays a percentage of your income for as long as you're disabled, under your contract. Most people insure their material possessions—their homes and cars, for example. But many of these same people
don't insure what is probably their most valuable asset — their ability to work and earn income. If you become sick
or are injured and can't work, will you be able to pay your bills and maintain your standard of living? If you depend on your
income to pay the bills, you need to seriously consider buying disability income insurance. Disability income insurance can
help you pay your bills by replacing a portion of your income. It can help you maintain your current lifestyle and help protect
you and your family from going into serious debt
Your chances of being disabled at some time during your working career are probably higher than you think. According to the Social Security Administration's Disability Benefits brochure, "Studies show that a 20-year-old worker has a 3-in-10 chance of becoming disabled before reaching retirement age" (SSA Publication No. 05-10029: www.ssa.gov/dibplan/index.htm). Of course, the chances that any one individual will be disabled before retirement depends on many factors, including age, general health, and occupation. Individual disability income insurance pays you benefits if you can't work because you're sick or injured. Some individual policies pay partial benefits if you can only work part-time due to sickness or injury. Individual policies specify how much you will be paid, how soon after you are disabled benefits will begin, and when benefits will end. Policies generally provide replacement of 50 to 70 percent of income. The length of time for which you may receive benefits can depend on whether accident or illness caused the disability. Monthly benefits are payable for a fixed period set forth in the policy, e.g. 2 years, 5 years, to age 65, or for the rest of your life, while disability continues. Benefits begin following a waiting period, which is the period between the time you become disabled and the time your benefit payments begin. Waiting periods can range from one week to a year or even two years. In general, the longer the waiting period the lower the cost of the policy. If you purchase an individual disability income insurance policy for yourself, and pay premiums with after-tax dollars, the benefits you receive are generally tax free. |
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