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Disability Income Insurance
Disability Income Insurance is a form of insurance that provides you with a portion of your income in the event you become either temporarily or permanently disabled due to illness or injury. There are usually several variable conditions with this form of insurance, ranging from the amount of payment to the length of time payment can be drawn. There is also a difference in how disability is defined, from short and long-term to total disability.
Disability benefits are often a percentage of the insured’s pre-disability income, usually limited to no more than 60%. This is because the benefits are tax-free, and therefore are only intended to replace the net income of the disabled. Disability benefits are also coordinated with any other payments the disabled may be receiving, such as Social Security benefits, in order to ensure that the insured does not receive more than their previous income. This measure is taken so that there is a lesser chance of fraud.
The length of time that the benefits are paid can range anywhere from two years to the age of retirement, though the longer the payout period is, the greater the premiums. Most disability policies have a waiting period which must expire before the insured can collect any benefits. This time, also known as an elimination period, can be as short as thirty days or as long as six months, and the longer the waiting period, the lower the premiums.
The Details of Life Insurance: Benefits & Riders
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