Most people are aware of the different types of insurance available to them. Everyone seems to know about health and life insurance and how they work in general. But few people think of disability insurance and how it works in conjunction with your overall financial plans and health. To be honest disability insurance is a fairly complicated policy that can have numerous variables that will dictate what is ultimately paid to the beneficiary.
For most people who work their employer will have some sort of group disability policy in place for their workers. These plans will normally pay between 30% and 40% of your income and these benefits are taxable to you as the beneficiary. The reason that they are taxable is the employer is paying the premiums, and in those instances, all of the benefits are taxable as the policy did not cost you anything, your employer paid the premiums. Also, group policies will tend to pay lower payouts as the coverage will cost your employer less than a policy that could pay upwards of 80% of your salary and total compensation.
So how do you get more coverage? It is fairly simple, you go into the marketplace and find an insurance company that offers the coverage you are looking for and pay for the premiums yourself. And this is where the policies can get a little tricky. Some policies, which will cost the most, replace upwards of 80% of your total compensation for not being able to perform the duties of your job. Meaning, you are not able to work in your profession the policy will pay for a certain number of years after a grace period, usually 90 days. Ideally, you want your policy to last until your full retirement age in the event you are not able to go back to work.
Then there are policies that will cover you if you are not able to work in your profession but could work in another. These policies have lower premiums and may pay a portion of your missed salary while you work another type of job. Regardless of the work restrictions that the policy places on you, it is crucial that you understand the policy and how it works. Have a disability insurance specialist assist you in selecting the proper policy for you and one that fits your financial needs.
As for premiums, the younger you are when you purchase the policy, the lower the premiums will tend to be. As you age and the likelihood that a claim could be filed increases, the premiums will undoubtedly go up. Males also tend to pay lower premiums than females as females tend to file more claims than males. And another factor that plays a large part in the premiums you will pay is the type of coverage, and you’re the risks associated with your job. Coverage that covers you not working in any field other than the one you are employed in will cost less than one that has fewer restrictions on employment. Also, the more dangerous a job is, the more you will pay in premiums as the risks to the insurance company increase, and they need to protect themselves as well.
Disability insurance is an important part of anyone financial planning and is an area that needs to be understood by you and your family. It is best to work with a disability insurance specialist and a financial planner to get your coverage just right and for your particular needs. It would be a shame to have all aspects of your finances to suffer and illness or injury and not be able to work. And then to add to that not to be getting paid anything while you are unable to work. That will destroy the best laid financial plan to waste.
If you need any more information on disability insurance, leave a comment here or feel free to message me at any time.
