Why should I purchase disability insurance now?
As with most types of disability insurance, the older you get the more expensive the
disability insurance coverage will become. Statistically, you may be more likely to become
disabled as you get older. It is not guaranteed that you can be insured and as you increase
in age, it becomes more difficult to acquire a disability insurance policy. More importantly,
an accident or debilitating illness could strike at any time.<\p>
How much coverage should I consider?
You should consider obtaining enough coverage to maintain the present lifestyle your
family has. This means taking into account rent or mortgage payments, food, automobiles
and other monthly expenses. You should be aware that income from Social Security benefits
or employer-related plans most likely would not come close to covering your expenses.
Typical disability insurance policies range from 60 to 70 percent of pre-tax income.
The table below calculates what your potential earnings may be up to age 50. Thus, if
you were to become disabled at age 35, and your monthly income was $3,000 per month, you
would face a lifetime loss of $1,460,451.00 in wages.
Current Monthly Income
| Age |
$2,000 |
$3,000 |
$4,000 |
$5,000 |
$6,000 |
$7,000 |
$8,000 |
| 25 |
1,449,648 |
2,174,471 |
2,899,295 |
3,624,119 |
5,073,767 |
7,248,238 |
10,872,357 |
| 30 |
1,199,867 |
1,799,801 |
2,399,735 |
2,999,669 |
4,199,563 |
5,999,337 |
8,999,006 |
| 35 |
973,634 |
1,460,451 |
1,947,268 |
2,434,085 |
3,407,719 |
4,868,17 |
7,303,254 |
| 40 |
768,727 |
1,153,091 |
1,537,454 |
1,921,818 |
2,690,545 |
3,843,636 |
5,765,454 |
| 45 |
583,137 |
874,705 |
1,166,274 |
1,457,842 |
2,040,979 |
2,915,684 |
4,373,527 |
| 50 |
415,042 |
622,563 |
830,084 |
1,037,605 |
1,452,647 |
2,075,210 |
3,112,815 |
How long do disability insurance plans pay a benefit?
There are many different plans with different options. The best plan would be one that
will replace the lost income until you are 65 years of age. Any other will not meet the
demands of your financial obligations.
What is the definition of disabled?
This will be a critical element to any disability insurance policy that you purchase.
The definitions will vary. You should consider a plan that defines "disabled" as being
unable to continue in your present occupation. Most workers have obtained a skill that
pays them at a salary reflective of that. A good policy is going to replace the income
that you would have lost if you are no longer capable of that earning power. There are
plans that call for you to be unable to perform, "any occupation". These should be avoided,
as they are not reflective of your loss.
What is an Elimination Period?
An elimination period is similar to the deductible on an auto policy. It will be the
amount of time, generally quantified in days, where you will have to wait until benefits
are paid. As in an auto policy, this will have a direct effect on the cost of your premiums.
A typical Elimination period would be approximately 90 days. This means that in order to be
protected, you would need to have your own financial resources to last 90 days without
any income.
|
Print this page