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Disability Insurance

If you have disability insurance, you are assured of an income when you are unable to work on account of an accident or illness. It has been observed that on reaching 40, the average worker faces only a 14 percent chance of dying before he/she reaches 65 but a 21 percent chance of being disabled for 90 days or more. This piece of statistics must be alarming enough for anyone to consider having disability insurance so that the person can protect him/herself in the event he/she loses the ability to work for months, or even years. Disability statistics reveals that heart disease and back problems are the two most familiar causes of disability and more people lose their homes through disability than through fire or death. In any case, it makes perfect sense and causes no harm if you decide to purchase disability insurance for supporting yourself and your family in anticipation of any such eventuality. In case you are single and disability arising out of an accident or illness forces you out of work for days, months, or even years, you may have no other means of support. If you are married, you may depend on your spouse for income, but even that may not solve all your financial problems. So it is wise for everyone who works and earns a living to buy disability insurance.

Those who are content with the knowledge that they are adequately insured against disability because of having coverage through their employers or through government programs such as Social Security and workers' compensation should be aware of the fact that only 50 percent of employers cover short-term disability, and only 40 percent cover long-term disability. They may receive benefits from government programs, but only after meeting a stringent definition of disability.

It is, therefore, prudent not to rely solely on Social Security. In addition to rejecting almost half of the total number of claims submitted, Social Security will not begin paying you until at least six months after you become disabled. The benefit you receive is much less than your pre-disability income as well. Workers’ compensation can benefit you only if your disability is work-related, and its amount depends on the state you live in. Some states just cover the diseases or disabilities outlined in that state's workers' compensation laws.

There are some government and private pension plans that will give you disability benefits. These disability plans mostly provide benefits based on total, permanent disability, or reduce your retirement benefit in proportion to what you have already received for a disability. You should also keep it in mind that these benefits are generally integrated with Social Security or workers' compensation. As a result of such integration, your benefit may be less than you expect if you also receive disability income from these government sources.

So an individual disability income policy is perhaps the best way to ensure adequate income in the event of disability. If you purchase a private disability income policy, you can hope to replace from 50% to 70% of your income. Insurers are not going to replace all your income because they want you to have an incentive to return to work. If you pay the premiums yourself, disability benefits are tax-free.

For buying disability insurance, you should consult an agent or your state's insurance department for necessary information. You must understand what you are buying and never hesitate to ask your agent to explain exactly what is in the policy. The most important things to consider when you buy a plan include the definition of disability, benefit period, a cost-of-living increase in benefits, a policy paying partial benefits, transition benefits and financial stability of the insurance company.



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