INCOME PROTECTION

Disability Income (DI) Insurance provides the beneficiary with monthly income if they become injured or are too sick to work. Although not mandatory like other forms of insurance, Disability Income Insurance should be strongly considered by anyone who relies on their income to meet necessary living expenses.  

According to the Social Security Administration, 1 in 4 of those currently in their 20's will become disabled before they reach retirement age. 

Generally speaking, a disability can have a devastating impact on your financial security.  If you are unable to work, and have hefty medical bills from an illness or injury, you would most likely deplete your savings or even accumulate debt.  Even if the disability lasted for a short period, your financial goals such as retirement and college savings could be at risk. 

Employer Sponsored Plans
Many employers and organizations provide some form of group disability protection, whether it be short or long term, through a group plan.  This type of coverage can be very reasonable and should be explored if available. Typically, long term plans provide coverage up to 60% of your salary, with the option to buy additional coverage. The risk of having only an employer sponsored plan, however, is that higher earners may be left with an income gap once their benefits are taxed and maximums are reached.  

Social Security Disability
Social Security may also provide disability benefits, but the stark reality is that the benefit amount is often barely enough to support a family and keep a beneficiary above the poverty level.  In 2018, the disability benefit was $771 monthly for individuals, and $1,157 per month for couples. And to qualify for benefits, you must meet the Social Security Act’s definition of disability, which is significantly stricter compared to other forms of disability benefits.    

Private Individual Plans
Private or individual disability income insurance is purchased independently.  These plans tend to be more costly than group plans, but they provide some key advantages, especially for high earners. If you are a highly skilled specialist such as a surgeon, you want a disability policy that will pay you until you are able to perform the specific duties of your specialty.  This is known as an “own occupation” policy, and is generally not available in group policies.   Another key advantage of private plans is that, should you need to file a claim, the benefits received would be income tax free, as long as you paid the premiums for the policy with after-tax dollars.  

It’s important to consult a financial professional to determine the type and amount of disability coverage that is right for you.  Contact the experts at Waxman Insurance to determine the best coverage to support your long term physical and financial wellness.