It is impossible to know when a tragedy is going to strike you or your family. In the blink of an eye, there could be a devastating accident, sudden illness, or any other type of misfortune that you were not expecting. With this in mind, one can see the need to have disability insurance. This will allow your life to go on in a somewhat normal fashion while you are unable to work.
The premiums for this type of insurance are going to vary by your income, age, type of employment, and the various policy provisions you choose. It is safe to say that the more coverage you choose to enroll in, the higher your premium will be. Below is everything you need to know about getting the right amount of coverage at an affordable price.
CHOOSING THE BENEFIT AMOUNT
The vast majority of disability insurance on the market will typically pay up to 80% of your income should you become disabled. This type of coverage is designed to ensure that you have an adequate amount of income if you are unable to work.
The Terms Of Benefits
You can decide to choose a benefit that is going to pay for one year, two years, five years, 65 years old, or until death. Of course, the longer your benefits are expected to last, the higher your premium payment is going to be.
The Elimination Period
The elimination period is the amount of time from which you became disabled to the time you start receiving benefits. If you are looking to save money, you can choose to wait a longer period before your benefits begin. Typically, the average wait is 90 days, but some policies will allow between 60 days and two years, depending on your needs and wants. If you are expecting paid sick time from your employer, it is best to consider this in your elimination period.
Once you have been approved by the insurance company they will issue the policy non-cancelable, which means it can not be canceled unless they stop covering everyone in your occupation. In addition, the company can not raise your premiums. However, this type of policy is going to have a higher premium.
In the case of a guaranteed renewable policy, it can not be canceled, but the insurance company can raise your premium if they raise it for the entire class of policyholders. The premium rate for a guaranteed renewable policy is typically much less than that of a noncancelable policy.
Any Occupation Or Own Occupation Coverage
Having Own occupation coverage means you will receive benefits when you are unable to work in your specific occupation. Professions such as dentists, lawyers, and physicians will choose this type of coverage. The “any occupation” coverage requires that you work in an occupation for which you are reasonably educated and trained in to receive benefits. The Own occupation policy will be significantly more expensive than those that only consider you disabled if you can not work at all.
Most employers in the workforce will offer their employees some form of disability income, sick pay, or a group disability policy. It is wise to talk to your employer to understand what benefits are provided to you and when they come into effect after becoming disabled. In addition, many employers will allow you to purchase more insurance at your own expense. Choosing to purchase additional coverage in this manner is generally less expensive than buying an individual policy.
It is also important to realize that the IRS makes a distinction between the coverage you purchase and that which is provided by through your employer. If you purchase your own policy and pay the premiums, the benefits are not taxable. However, if it is through your employer, your benefits will be taxed as income. One final consideration with individual coverage are known as COLA (Cost of Living Adjustment) riders which will increase the benefit payments and provisions once you are disabled without the need for evidence of insurability as your income gains over the years.
It is best to discuss your particular situation with a certified CPA to decide which structure would be best for your needs and situation. If you need help discussing your situation for life insurance, you can contact me directly at email@example.com or (877) 977-0157