Disability Insurance 101

jepfin.disabilityIn 2007 the US Social Security Administration reported that 3 out of 10 people will experience a sustained disability that will keep them out of work for 3 or more months. The Administration also went on to explain that the average Social Security disability benefit for those that qualify is just $978/mn. In 2005, Health Affairs reported that disabilities accounted for 50% of all foreclosures. Those are some pretty stark numbers illuminating the importance of disability coverage, especially for the self-employed and/or family bread winner(s).
Disability coverage is intended to pay the income of an individual while that person experiences a sustained disability. Disability coverage can be very affordable and is crucial for a business owner or family bread winner.
Here is a list of questions to consider when choosing a disability plan:

  1. How much money do I need each month to cover necessary expenses?
  2. How much do I have in liquid assets?
  3. How long could I last on these assets?
  4. Do I have any passive income source(s)?
  5. Does my employer or do I have an existing disability plan in force protecting me and if so, what are the coverage amounts? Plan design?

The Elimination Period

What many people do not realize is that every disability plan has something called an “elimination period”, which is essentially the length of time that must pass before a plan will pay out while a person is disabled. Generally, the longer the elimination period the lower the premium, similar to the way a deductible works. Disability plans are not designed to pay out for a mere sick day, but for a sustained disability. Normal elimination periods typically range from 1 week to 6 months, but the most common elimination period maybe two weeks for a short term plan or 90 days for a long term. It is important to choose an elimination period with the amount of reserve liquid cash in mind so that there is not a financial problem if a claim is made.
Short term disability plans will pay out from 6 months to 2 years, while a long-term disability plan will go as long as to age 70+ for an insured. To learn more about disability plan and get your own free consultation get in touch today:

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