Disability insurance is designed to protect one of your most valuable assets: your income. If you’re unable to work due to a sickness or injury, disability income insurance can help you meet expenses and maintain your standard of living. It can help you pay bills like your mortgage, tuition and car payments, and help cover expenses for food, clothing and utilities. By replacing a portion of your income, disability income insurance can help provide financial security until you get back on your feet and return to work, if possible, or pay you until a normal retirement age.
There are several types of disability income policies available. As taxpayers, most workers are already enrolled in a disability plan: Social Security’s Disability Insurance. The definition of disability that the Social Security Administration uses is strict, i.e., your disability is expected to last for at least 12 months or is expected to result in your death. Therefore, it is often hard to qualify for Social Security disability benefits.
Many employers offer group disability insurance as a benefit. It is a cost-effective way to provide a base amount of income protection. These policy benefits are typically capped and intended only to provide for a basic amount of coverage; therefore, high wage earners very often have a large portion of their income unprotected. These employees may choose to supplement their group disability plan with an individual disability income policy, customized to a specific set of individual needs. Many individual plans include an “own occupation” provision to protect a person’s particular skill in the workforce. Additional features to individual disability policies can include protection for partial disabilities, inflation of the benefit, and future increases in coverage without having to be “re-underwritten.”
Business owners have access to unique disability income insurance policies to help them address their potential challenges of keeping their business running during a disability of the owner or key person. Disability Buy-Out Coverage is an effective way for partners to protect their own interest as well as the interest of the other partner. This works substantially similar to the buy-sell agreement funded with life insurance I discussed last week, but this protects against disabling events. If Partner A were to become disabled and unable to perform his normal duties, this policy’s benefits ensure Partner B has cash to buyout Partner A’s interest and Partner A has liquid cash at a critical time.
Another policy tailored for business owners is a Business Overhead Expense policy, designed to cover the ongoing, regular operating expenses for a limited time while an owner can recover or decide on other options. Finally, a Business Loan Protection policy can make sure the loan payment is covered in the event of a disability so that a business can survive through a difficult transition period.
Protecting your most valuable asset, your ability to earn an income, makes good financial sense. A financial professional or trusted insurance adviser can help you customize disability income policies for your specific needs.
Disclosures
This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
