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Disability Income Insurance

Disability income insurance pays you a monthly benefit to replace a percentage of your income if you're disabled and therefore unable to work.

What it does:

• It protects your most valuable single asset: your ability to earn an income.
• It lets you tailor the cost and terms of the policy to fit your own budget and needs, by allowing you to choose how long you'll wait after becoming disabled for benefit payments to begin, and how long the payments will last.

What it doesn't do:

• It doesn't replace your entire paycheck. Most policies will only cover up to 60% or 70% of your salary.
• It doesn't pay benefits under any and all circumstances. Policies include a specific definition of "disabled" which you must meet in order to qualify for benefit payments.

A drunk driver slams into your car, putting you flat on your back in the hospital for months with severe injuries.  Or you contract a severe illness that keeps you off the job for a year.

What happens to you, your family and your standard of living should an accident or an illness prevent you from bringing home a paycheck for a long time? How would you pay your bills?

Most people find it hard to find it hard to imagine themselves becoming severely disabled.  The sad truth is lengthy disabilities are common and wreak economic, as well as personal havoc.  At the age of forty, for example, when your earning potential is assumed to be reaching its peak, your chances of becoming disabled are greater than your chances of dying.  In addition, some 48 percent of all home-loan defaults are a direct result of an extended disability.

.  Consider these statistics:

• A disabling accident occurs once every four seconds in the U.S.¹
• If you're 35 years old, your chances of suffering a disability are over twice that of dying during your earning years.²
• Conditions such as heart disease and stroke which once were likely to result in death, are now among the leading disablers.³

¹ Disability in the U.S:  Extent and Economic Impact, HIAA,
   1991.

² 1985 Commissioners Individual Disability Table-A, 90 day
   continuance table.

³ Lois M. Verbrugge, “Longer Life but Worsening Health?
   Trends in Health and Mortality of Middle-Aged and Older
   Persons,“ Health and Society 62:475-519, 1984

PROTECT YOUR FAMILY...

There is a way to protect yourself and your loved ones from a financially devastating blow.  It is called disability income insurance.  It replaces a portion of your monthly income should you become disabled.

Disability insurance will not replace 100 percent of your earnings. Generally, benefits replace between 40 and 60 percent of your paycheck.

When deciding whether or not to acquire disability insurance, ask yourself this question:  How long could I live off my savings should an accident or a serious illness keep me from earning a paycheck?  In today's spending-oriented society, most people could not live for very long on their savings, especially if they have children.

BEFORE YOU BUY DISABILITY PROTECTION...

Before purchasing disability income insurance, you should review the following important terms and basic provisions of disability income policies.

The policy should be "noncancelable" and "guaranteed renewable." This means that the insurance company must renew your policy and cannot raise your rates.

Most policies define disability according to either "any occupation" or "own occupation." The former definition will classify you as disabled if you are unable to perform the duties of any occupation for which you are reasonably suited by education, training or experience.  The later defines you as disabled if you are unable to perform the duties of your own occupation.  This second definition allows you to be employed in another occupation and still qualify for full benefits.

Your job is a major factor in how likely you are to become disabled.  Insurance companies have accessed the hazards of a broad range of occupations and put those occupations into categories based on risk.  After applying certain screens to your occupation, the insurance company will place you into one of several categories that influence the rate you pay for disability insurance.

The elimination period is  the length of time between becoming disabled and receiving the first payment from a disability and receiving the first payment from a disability insurance policy, Elimination periods can be as short as 30 days or as long as 360 days.  The longer the elimination period, the less the policy will cost you.

Benefit period refers to the length of time that you will receive payments from your policy.  Options range from 12 months all the way to lifetime.   Most common is to age 65.  The shorter the benefit period, the less expensive the policy.

Riders tailor a standard policy to fit the needs of an individual. An example of a rider is a cost-of-living adjustment (or COLA), which permits payments to increase as the Consumer Price Index rises.

Only you can make the decision to buy disability income insurance. Your choice will be affected by your individual financial circumstances and any financial obligations you may have to others (i.e. Mortgages).

Are Disability Premiums tax deductible?

The Internal Revenue leave this answer to you.  If you take the tax deduction for the payments and then find yourself collecting your benefits then the entire amount is taxable.

If you do not  take a tax deduction for the payments then the benefits are NOT taxed.

You decide.

Please contact me with any question about disability income insurance if you need your current policy reviewed or to obtain new coverage.

Insurance Company Ratings

-CHECK LIFE INSURERS-

This rating system is for an informed insurance consumer, and NOT an endorsement by Either Jeffrey Rosenthal or Margaret Diaz of of any company.

* Only A.M. Best charges for a rating by phone - $2.50 a minute.   Your agent should be able to provide a FREE A.M. Best guide for the proposed Insurance Carrier.

This material is not intended to replace specific advice for your situation.  You are advised to discuss your situation with a qualified attorney, tax advisor, financial advisor, or insurance agent. The rules are quite complex and we did not intend to over-simplify these complicated rules.  Our intention was to familiarize you the the concepts and vocabulary so that you may have an informed discussion with a qualified professional.