If you were disabled and
unable to work as a result of an accident or illness, what would you and
your family do for income?
Disability income insurance,
which complements health insurance, can replace lost income. At age 40,
the average worker faces only a 14 percent chance of dying before age 65
but a 21 percent chance of being disabled for 90 days or more.
Three basic ways to replace income...
Employer-paid disability
insurance
This is required in most
states. Most employers provide some short-term sick leave. Many larger
employers provide long-term disability coverage as well, typically with
benefits of up to 60 percent of salary lasting from five years to age 65,
and in some cases extended for life.
Social Security disability
benefits
This can be paid to workers
whose disability is expected to last at least 12 months and is so severe
that no gainful employment can be performed.
Individual disability
income insurance policies
For most workers, even those
with some employer-paid coverage, an individual disability income policy
is the best way to ensure adequate income in the event of disability.
When you buy a private
disability income policy, you can expect to replace from 50% to 70% of
income. Insurers won’t replace all your income because they want you to
have an incentive to return to work. However, when you pay the premiums
yourself, disability benefits are not taxed. (Benefits from employer-paid
policies are subject to income tax.)
For more information:
