What is disability insurance?
Disability insurance is an income replacement policy in the event that you are injured or too sick to work. Your most valuable asset is your ability to work and earn an income. Disability insurance is the only type of insurance that will keep all of your other assets protected. If you fail to insure your income, you may have trouble covering your regular household expenses, loan payments and even the premiums due on other forms of insurance like homeowners, auto and life insurance. You could run the risk of losing your home, car, insurance plans and ability to fund your retirement.
Why Buy Disability Income Insurance?
You work hard to accumulate assets and develop long term financial plans as you go through life. How are you going to keep those assets and long term plans in place if you can no longer earn an income? Government disability payments do not always pay you in the event of a disability. The requirements are strict and on average, claimants are only approved in a third of all cases. Disability insurance can be structured to cover anywhere from partial to total disabilities that may last for the short or long term. Make sure you are covered if the time comes.
What to look for in a policy?
- Adequate Monthly Income Replacement Benefit - When considering buying a disability policy or when reviewing one that is currently in place, the main concern is whether or not the benefit is adequate to cover the insured's monthly expenses. Most people choose to insure all of their income even though it may be higher than their expenses so they are sure to have discretionary income. If your policy does not cover your bills, it will do you little to protect your assets.
- Inflation Protection - A policy should always take into consideration inflation and the impact it will have on the monthly benefit in the long-term . Always look at adding an inflation rider to your policy to make sure your benefits are not eroded over time.
- Partial Disability Coverage - The simple truth is that most disabilities are not total disabilities. The majority are partial disabilities which decrease the amount of time you are able to work on a weekly basis. A perfect example of this is Parkinson's disease which is a progressive disease. Always look for a residual disability rider to ensure a partial benefit will be paid if you are partially disabled.
- Definition of Disability - One way that insurance companies can save money on a policy is through their definition of disability. One that reads "any occupation" will make you work a job even if it is not your regular occupation for which you are qualified. Make sure you evaluate the definition of disability inside your group or individual disability plan-an "own occupation" definition is best.
- Consistent Pricing - Some providers have a history of system-wide premium increases. Make sure you evaluate the financial history of the carrier you are considering and the premium increases they have imposed in the past. A non-cancellable rider is best and will eliminate you from being affected by these increases.
For Individual Needs
Many insurance companies offer not only personal income replacement plans that most of us are familiar with, but also critical illness plans that will provide a lump sum payment in the event of a qualifying disability. Since critical illness does not require income verification for amounts up to $250,000, it can be a perfect solution for those who show very little income such as a business owner with multiple write-offs.
For Business Needs
Disability insurance is available to cover not only the group disability insurance needs of the employees but also the needs of the business owners. Business overhead expense insurance is purchased by the business owner to cover business expenses while he or she is disabled so that the company doesn't go out of business because of inability to pay the utilities, payroll, and other such bills. Buy-out insurance is purchased by business partners and is simply a lump sum benefit paid in the event of the disability of a business owner as a way to buy-out that owner's share of the business. Regardless of the need a business may have, we can help insure with disability coverage! Since a disability is three times more likely to occur than death on a 40-year-old client, don't overlook this need!
For more information, please call 1-855-ASK-4-FCA, and speak with an Insurance Specialist.
Securities, insurance products and advisory services are offered through Essex National Securities LLC, member FINRA/SIPC and an SEC registered investment advisor, which is not affiliated with this financial institution.