Disability Insurance

Disability insurance pays benefits when you are unable to earn a living because of a disabling injury or illness. Like all insurance, disability insurance is designed to protect you and your family against financial disaster. Most disability policies pay a benefit that replaces a portion of your earned income (usually 50 percent to 70 percent) when you are unable to work. Generally, benefits are provided for the disabled person in the form of monthly payments. A disability insurance policy should ensure that there is sufficient income replacement to maintain your standard of living when you cannot work.

Who needs disability insurance?

Almost anyone who earns a living needs disability insurance. Disability strikes more often than you may think. The chances of being disabled for longer than three months are much greater than the chances of dying prematurely.

Types of Disability Insurance

Short-term Disability Plans. Short-term disability plans are the most common type of disability insurance that employers offer to their employees. Short-term disability insurance is designed to provide benefits for a temporary period of time, usually three to six months. As a result, this type of policy usually has a waiting period of eight to 10 days. These type of plan bridges the gap between sick leave plans and long-term disability plans.

Long-term Disability Plans. Long-term disability insurance is designed to provide benefits for a long duration such as two years, five years or in some cases up to age 65. The waiting period for this policy is usually 90 days or more. Many employers offer group long-term disability insurance. You should examine your employer’s plan closely since they vary widely. You may need to buy extra disability coverage to supplement your group plan and to provide disability coverage in the event you cease to be eligible for the group disability insurance.

Taxation of Disability Insurance Benefits and Premiums

When you purchase private disability insurance, the benefits paid are generally received on a tax-free basis. If an employer pays all or part of the premium for group disability insurance coverage, the benefit payments are considered to be taxable income to you.

Things to consider when purchasing disability insurance

• Ask yourself what expenses would change if you or your spouse become disabled.
• Review group coverage at work. You may not want to rely on just group policies in the event that you change jobs or your employer changes to another insurer where you may no longer be eligible. The coverage may also be inadequate.
• Review your existing policy’s monthly disability benefit, definition of disability, waiting period and duration of benefits.
• Review the coverage periodically and adjust it according to the changes in your income and expense needs.

Disability insurance is an important part of any financial plan and there are various types of insurance policies available through your Ziegler financial advisor. Each policy is designed to suit the coverage and investment requirements of different individuals. For a complete assessment of your needs and to help you determine which options are right for you, contact your financial advisor or our Client Service Center at 888.884.8339.