What is disability insurance? Should I have it?
Disability Insurance is paycheck protection
What does this mean? Well, in short, it means that if you lose your job because of any health or accident cause you will have an income source from your disability coverage plan.
Your health insurance may cover the "repair" or care of your body, but it does not cover the possibility of not being able to work to support yourself or your family. Disability Insurance can replace up to 66% of your income on a tax-deferred basis if you are unable to perform the duties of YOUR job.
Disability coverage has three moving parts that determines your premium
- How much – Purchased in increments of $1000, how much insurance do you need? Cover your rent or mortgage if you have savings you can draw on or cover all of your bills if need be.
- When – This type of insurance has an exclusion, or waiting period, embedded in the plan. The longer we can wait to receive our benefits, the less the plan costs. Waiting periods can be as short as 0 days for an accident and up to 90 days for an accident or illness. If your savings allow you to go a month without income, premium savings are realized by excluding the first thirty days of a disability versus needing income immediately.
- How long – policies can provide coverage for as little as 3 months and up to age 65 per incident.
Disability coverage can be an important part of business expense planning when a key employee becomes disabled.
- If a key employee is unable to work / earn income for the business, disability insurance can pay benefits to the business to pay for ongoing business expenses, overhead costs, etc.
- Disability insurance can also pay benefits to the business to offset the expense of making a temporary hire to replace a disabled partner in the business.