What if the unexpected were to happen and suddenly, you were no longer able to work? What if unanticipated illness or injury were to impede your ability to provide for you and your family? Not only would you have the stress of affording everyday living expenses, but you may also have to place long sought-after financial goals on hold. However, what if there was a proactive strategy that could protect you and your family against the unpredictable risk of losing your main source of income? The proper amount of disability coverage can help mitigate the potential shortfall in income should an unexpected accident or ailment render you incapable of working.
Disability insurance, often called DI, is a form of insurance that protects the insured’s income against the risk of disability. DI policies have what’s known as an elimination period or waiting period. This is the period of time between the time of injury (when one becomes disabled) and the commencement of benefits. The waiting period is often 90 days, however, policy owners can usually elect to adjust the length of the waiting period. As waiting periods are altered, the premium charges are as well. There is an inverse relationship between the waiting period length and the premium size. The two main types of long-term disability insurance include inpidual disability insurance and group disability insurance.
Inpidual disability insurance is a policy type that could work best for self-employed, or employees working for an employer that does not provide long-term disability benefits. Inpidual policies work well for people who may not have enough coverage through their employer and want more protection. Disability policies will vary considerably amongst insurance carriers, employers, occupations and industries. It is important to find an insurer that is a good match for your needs.
Policies with a longer coverage period and higher benefit payments tend to have higher premiums compared to that of a policy containing shorter coverage periods and lower benefits. An advantage associated with inpidual disability benefits include its tax free nature. Disability benefits will be considered tax free income if the premiums are paid with personal, after tax monies. Additionally an inpidual policy is portable. Should you change employers at some point, you have the ability to keep your inpidual policy. Your coverage can increase as your income increases as long as you purchase the appropriate rider(s).
Far different from inpidual disability policies are group disability policies. Group disability policies are typically offered through your employer. There is no health underwriting associated with group coverage, as an employee’s health is not assessed on an inpidual basis. The health rating is actually determined on the group level, as a single unit. This policy type has benefits that will kick in after the stated elimination period, which tends to vary amongst employers. Long-term coverage can have benefit periods of 2, 5 and 10 years. There are also the options of “until age 65” coverage and of course, lifetime coverage. Group coverage can be a tax deductible expense to the business. It can also help the employer entice and retain quality employees.
Disability coverage can serve as an integral component of your financial plan. Although disability may not be as devastating as death, the additional protection provided by DI can help mitigate the irreparable financial damage that one’s inability to work can cause. With the ability to protect both you and your family against an unexpected shortfall in income, DI can equip hard-working inpiduals with a sense of peace of mind. Disability insurance is a strategy that many in the work force tend to overlook. Your greatest asset is not your residence nor your pension, but rather your human capital. Your ability to participate in the workforce and produce annual income over the course of your lifetime is your most valuable asset; and disability insurance helps provide the ultimate protection for that asset.
Do right by all the hard work you have done and the effort you continue to put forth by giving us a call today at (631) 952-4466 x12. We can further educate you on disability insurance and help you find a policy that fits your circumstances. Be sure to visit our website at Mitlinfinancial.com and watch the most recent Mitlin Minute on disability insurance.
Disclaimer: This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.