Disability insurance protects your earned income. If you rely on your salary to pay the mortgage, put food on the table and pay other household bills, disability insurance will protect your income if you get too sick or hurt to work. For example, it would continue to pay a monthly benefit if you were battling cancer, had a heart attack, stroke, or another major illness or accident that keeps you from working and earning an income.
You may have disability benefits through your employer. If so, you would have either short-term disability, long-term disability or both. Short-term disability generally only lasts a short time (six months to two years, on average) and may only cover 50-60% of your income. Long- term disability plans may not protect enough of your income, so you may need to supplement with additional coverage that bridges that gap. Additionally, these benefits are taxable, and if you leave the company behind, you leave the benefit behind as well. I generally believe you should take all the benefits that your employer offers, but make sure you know exactly what it covers and whether or not the coverage is enough or if you will need to supplement it with additional coverage
If you already have enough assets saved, disability coverage may be unnecessary. As part of the financial planning process, we can help you determine whether this is an important insurance coverage for you or not.
Benefits of disability insurance
Individual disability insurance can help you in many ways. First and foremost, it will allow you and your family to maintain your current standard of living without worry. Since your income will be protected, you won’t have to sell the house, take your kids out of private school or pay taxes on your benefit while you are receiving it, assuming you did not deduct the premiums. Secondly, it will lower the risk to your long-term financial security. During a traumatic episode such as dealing with a sudden disability can cause you to have to dip into your savings to cover not only your day-to-day expenses, but possibly the rising medical costs and ongoing care. Even a short-term disability of one year or less can wreak havoc on your retirement savings.
An individual policy can also ensure that you are covered for all of the years you continue to work, and most plans will continue until age 65. Also, since you own the policy, if you change jobs it covers you between jobs and goes with you when you start a new one. It can also provide income protection if you are self-employed.
What to consider when choosing disability insurance
At Milestone Wealth, we will work closely with you to make sure that you are getting the disability coverage that best suits your needs. Above all, we want to make sure you get enough coverage, and that it is coverage that you can count on.
First, we will determine how much coverage you need. We want to make sure that the benefit covers as much as possible to help replace the income that has now stopped.
Next, we create a policy structure that will best serve these anticipated needs. We will always do our best to help you understand the language in your policy, and make sure you are clear about the benefits as well as limitations so that if anything should happen, you know exactly what to expect
You need to know:
- How soon your benefits will begin to pay out after the disability. There may be a 60, 90 or maybe even a 180-day elimination period before you begin to receive any payouts.
- Think of the elimination period as kind of like the deductible with health insurance. The elimination period is the time period you are out of pocket before benefits begin.
- How long your benefits will last: some of the more common options include having the ability to choose a period of two years, five years, or to age 65.
- What circumstances allow you to qualify for disability benefits: the definition of disability differs from policy to policy – we will make sure that the terms are reasonable enough for you to feel that it is worthwhile.
Disability insurance for professionals
Health care professionals such as doctors, surgeons and dentists have very specific needs around the subject of disability. If you become fully or partially disabled and are unable to perform your work, disability insurance gives you options. It allows you to protect your income and lifestyle from catastrophic change and can be the difference between having to make major changes or just minor adjustments. Depending on the injury or illness, you may need to continue to work in order to receive your benefit, but in most cases the insurance will cover your lost income so that you can carry on doing what you do at a reduced workload.
Milestone Wealth: your source for disability insurance
If you have been thinking about disability insurance and would like to speak to us, call today. We would love to talk to you about your situation and go over your best options.