Disability income (DI) insurance provides supplementary income in the event an illness or accident results in a disability that prevents the insured from earning income in their usual occupation. Benefits are designed to replace between 45% and 65% of the insured’s gross income are intended to help the insured pay recurring expenses. Typically paid out on a monthly basis, funds are tax-free because the insured paid premiums with after-tax dollars.
Premiums for a Disability Income plan are based on the occupation, earnings, and age of the insured. Specific monthly payout amounts are designated, with $3,000 a month being a commonly purchased benefit. Unless stated in the policy language, DI policies do not coordinate with Social Security benefits but pay in addition to it. Most insurance companies provide plans that carry a fixed maximum benefit period, such as 2, 3, 5, or 10 years. Most policies have a wait or elimination period before the insured is eligible to receive benefits, and will require an additional 30-45 days before releasing funds after a claim. All claims will be vetted and verified with a physician.
DI policies can be offered by employers, but those benefits are often much more limited. They may not pay out enough to manage basic expenses. Worker Compensation Benefits, another way to receive income after injury, are often misunderstood. Worker’s Comp only pays for injuries that occur in certain workplaces, and funds are often delayed for extended periods of time. Self-employed individuals and small business owners must go it alone when it comes to disability income. Even if an injury is work-related, an independent business owner may not claim Worker’s Compensation for themselves.
Individually purchased Disability Income plans can be one of the smartest moves a breadwinner can make to protect the stability of their finances if a major injury occurs. United Agent Resources can help you tailor the right plan to suit your client’s needs.
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