Disability Insurance

Pay day. We all look forward to that day each pay period when we receive our reward for a job well done. But what would happen today if you didn't have a pay day, or two or 20? This could happen if you were to become sick or hurt and unable to work. You may not think it will happen to you, but the fact is the statistics are frightening. During our working years, we're more likely to become disabled than to die prematurely. Yet most of us plan for the likelihood of death by purchasing life insurance, but not for the probability of becoming disabled. Ask yourself, if you were to become sick or hurt and unable to work, how long could you survive financially without an income? Disability insurance could be the means of financial survival.

What is disability insurance?

Disability insurance (DI), sometimes referred to as income protection, is exactly that -protecting your ability to earn a living. If you become sick or hurt and unable to work, you'll receive payments from the insurance company, based on your particular policy. This check will help you continue paying living expenses such as rent, mortgage, car payment, food, insurance, utilities, medical expenses and more.

Who needs DI?

If you depend on your ability to work and earn an income, you need disability insurance. If you cannot respond to, "Who will take care of your monthly expenses if you become sick or disabled and not able to work?" you need DI.

How much DI do I need?

Add up all the benefits you are entitled to under your employer program and other individual disability insurance you may have, along with the monthly income you could count on from other sources such as your savings. If the total is less than your required income after taxes, you may be unable to pay your day-to-day bills while recuperating. You will want to consider purchasing additional disability insurance and should contact your agent. Your agent can prepare a needs analysis for you.

When am I totally disabled?

It is important to consider how your policy defines total disability. During the own occupation period shown on your policy schedule, you are considered totally disabled if you are sick or injured and cannot perform all of the substantial and material duties of your regular occupation.

Am I covered by group disability benefits?

First, you need to find out exactly what benefits your employer offers in the event of a disabling illness or injury. Most employers allow some short-term sick leave, which may last from a few days to as much as six months.

You may also have group long-term disability coverage through your employer. Typical group long-term disability benefits replace about 60 percent of salary (which is generally subject to a maximum and does not include bonus or commission), start when short-term benefits are exhausted, and continue anywhere from five years to life. Often, group long-term insurance is fully paid for by employers without contributions by employees. As a result, employer-paid disability income benefits are subject to income tax, and you should take this into consideration when evaluating your needs.

Questions to ask your employer about your group disability plan:

• Find out how long you must wait before benefits begin and how long payments will continue during your disability.
• Ask how much of your income will be replaced during a disability. Be sure to ask if there is a cap on the amount and if bonus or commissions are considered as part of the calculation.
• Find out whether your employer's plan takes other disability coverage (such as government programs) into account when calculating your long-term disability pay.
• Ask for a booklet describing the disability coverage your company offers.

What about Social Security disability benefits?

Most salaried workers in the United States participate in the federal government's Social Security program. Social Security is best known for its retirement benefits. But the Social Security Administration (SSA) also administers disability benefits.

Here are some important points to remember:

• Eligibility is based on being unable to perform any gainful employment, not just the job you were performing at the time the disability began.
• You are eligible for benefits after you have been disabled for five months and if the disability is expected to last 12 months or to result in death.
• Social Security payments may be reduced by disability entitlements under other government programs.
• After 24 months of benefits, recipients qualify for Medicare. If you want the medical insurance portion of Medicare, in addition to hospital coverage, you must enroll and pay a monthly premium.

Let your Paragon Lending & Financial Solutions Consultant provide you with a Financial Needs Analysis that will help you calculate how much disability insurance you may need.