Disability-income insurance is insurance that provides a monthly cash benefit to the policyholder in the event of sickness or injury that inhibits the ability to work. Disability-income insurance is meant as a substitute of no more than 80% of income on a tax-free basis should illness keep you from earning an income in your occupation. Some things that must be considered before choosing disability insurance include:
a) how long to wait (called the elimination period) before income kicks in (usually 90 days),
b) how long will the policy cover a loss of income (called the benefit period),
c) short term disability plans usually have a thirteen to twenty six week benefit period,
d) long term disability plans cover from five years up to age 67 benefit period,
e) whether the policy covers partial or residual disability claims and not just ‘total’ only.
Another source of disability insurance is the Social Security program. The Social Security Administration (SSA), which is responsible for retirement benefits, also administers disability benefits. Eligibility for SSA disability payments is based on being unable to perform any gainful employment and not the job that was being performed at the time the disability began. In other words, being a firefighter or a construction worker does not entitle one to higher disability benefits than people in other professions. Social Security disability payments are subject to federal income tax if your “combined income,” adjusted gross income plus any nontaxable interest income and half of your Social Security benefits, exceeds certain limits. To find out more about SSA disability payments, go to socialsecurity.gov.
Purchasing a disability plan can be confusing. We have expert advice to help you make a good decision so call us today for more details.