Why Do I Need Disability Income Insurance?
This is where Disability Insurance comes into play- you can provide an income to you and your loved ones if a disability strikes you and you are unable to work. Think about this – a 25-year-old person earning about $50,000 could lose $3.8 million dollars in future earnings.
Here are the basic facts- if you have a job you will most likely need Disability Insurance. How long could you and your loved ones exist without a regular paycheck?
Where to get Disability Income Insurance:
Plans through Professional Organizations: Group Disability insurance plans are also available through many professional organizations. Some underwriting is involved, and the premiums are usually based on your age and your income. If you change professions the disability income insurance may not follow you – please check your policy, or verify this with the insurance company that wrote the policy.
An Individual Policy – Buy It On Your Own: This would be an Individual Disability Insurance Policy that you purchase on your own. Your coverage would remain intact regardless of your work place or situation.
Sources of Disability Income Insurance:
State Disability Insurance: A few states provide a short-term Disability Coverage that can be purchased through payroll deductions. California, Hawaii, New Jersey, New York, and Rhode Island are currently offering the short-term disability coverage.
Social Security: The government offers Disability Insurance, but qualifying for benefits can be a lengthily process. The benefits are based on your salary and work history, and the payment levels are fairly modest.
Employer-Sponsored Coverage: This is the main source of Disability Protection in the United States, especially through larger employers. Two forms of Disability Insurance are typically made available: Short-Term Disability (STD), and Long-Term Disability (LTD).
Short-Term Disability Insurance usually provides three to six months of significant salary replacement.
Long-Term Disability Insurance provides 40% to 60% salary replacement of your base salary (pretax) for longer periods. Two or Five year periods are the most common.
Individual Disability Insurance: Individual Disability Policies provide the most flexible and reliable source of coverage. These policies are portable (you can take them with you if you change jobs), and you do not have to worry about losing coverage. Generally, you can expect about 40% to 60% of you Gross Salary (pre-disability). Benefits would not be taxed if the premiums are paid with after-tax dollars.