Insurance may be the single most important piece
protection an individual can have!
probability is that an individual is far more likely to become disabled for an
extended period of time rather than die. Because of modern medicine, the
diseases that used to kill people now disable us. For the most part, if a
person is disabled for six months, the probability is that the person will be
disabled for 4-5 years or longer.
replaces your income should you become disabled and unable to work. Many
people have some form of disability insurance through their employer. The
employers’ policy may not be just what your need. In this case, you will
probably want to supplement the employer's policy with an individual policy of
your own. Generally, there is a period of time (elimination period- Example:
60 days) you must be disabled before you can begin collecting
disability payments from the insurance company. This period may vary.
The premiums for a
disability policy are based on age, sex, occupation, and income. Insurance
companies will allow an individual to take out a policy covering anywhere from
about 50% to 70% of the lost monthly income. Also. if your employer pays your
disability insurance, you pay tax on that income. If you pay for the
disability insurance yourself, the disability income is tax-free.
Most of the time,
insurance companies either consider you good enough to work or not good
enough. You're either disabled or not disabled. The insured can add on what's
called a Residual Rider. It may add about 20% to the cost of the policy;
however, it will allow you to return to work part time, collect part of your
salary, and receive a partial disability payment.
Always consider a
policy, which is 'Guaranteed Renewable'. Otherwise, the insurance company can
cancel the policy. If it is guaranteed renewable, the only reason for
cancellation is non-payment of the premium. Also, try to get a policy that is
'noncancelable'. This means that the premium rate stated on the policy can
never be raised.