The reality of the situation is that a disabled person will probably stop receiving paychecks, yet there will still be all the needs associated with life along with increased medical bills. The goal of disability insurance is to protect your earning power so financial needs can be met while you recuperate. Your biggest asset is your ability to earn income.

        Disability Insurance comes in many forms, but its basic purpose is to replace lost income due to a disability. It is designed to operate as a safety net for families and individuals and it can be customized to meet the needs of the insured.

        A typical policy will include a definition of disability and understanding the definitions is crucial. There are usually two definitions and the one you choose will determine when benefits are paid. The inability to engage in "ANY OCCUPATION" refers to the insured's inability to engage in any occupation and is therefore considered disabled. "OWN OCCUPATION" means the insured is to be considered disabled if they cannot engage in their chosen profession. Own Occupation definition is considered more lenient since its benefits will start once you've been deemed disabled for your occupation.  To make things more difficult, not all occupations can be insured and each policy has its own set of requirements. For example, the following professions are often deemed uninsurable for various reasons: law enforcement, active military duty (often the military provides coverage on their own), and pilots. You premium will depend on your health, your occupation, and the type of coverage you choose.

        Policies can also be cancelable or non-cancelable and the more details on a policy, the more expensive it becomes. A cancelable policy will cover your first disability, but subsequent coverage is at the option of the insurer. A non-cancelable policy is often called a guaranteed renewable policy and will cost you more than a cancelable policy. However, with this coverage, an insurer cannot discontinue your policy even if you have repeated disability claims.

        There is also an elimination period to consider and that determines the amount of time that must pass after a disability until benefits are paid. The longer the elimination period, the lower the premium, but that will also increase the amount of time you need to self-finance daily expenses. The maximum benefit period indicates the total length of time benefits are paid during a disability.

       Social Security does offer disability protection, but a large number of claims can be denied by the SSA. To be considered disabled by the SSA, your disability must be expected to last at least one year or to end in death. You also have to be unable to do ANY gainful work, not just unable to perform your current job.

        A large number of employers also offer disability coverage to their employees. It is usually capped at 60% of your current salary with a maximum monthly payment. These payments are subject to Federal and State taxes and can be reduced if you also receive Social Security coverage. This coverage is also canceled if you leave your job, but a private policy is structured to cover you wherever you go.

         As with all insurance coverage, research the financial stability of the company before you purchase anything and look at your income needs in order to determine the benefit amount needed. The goal is to replace lost income and maintain the current standard of living. There are numerous supplemental benefits, but be sure you need them before purchasing any extras.

        As always, please contact our office if you have any questions or need advice.