Disability Income Insurance- Excerpts of Finance for dad

Why should you include disability income insurance in your plan?

Statistics show that there is a higher probability of becoming handicapped than passing away at any age. According to the “American Council of Life Insurers”, an umbrella organization of life insurance companies, almost one-third of the US population will suffer a serious disability between the ages of 35 and 65; likewise, a person who is 35 years old is six times more likely to be handicapped than to die before the age of 65. The objective of this insurance is to replace your income in the case that, due to an illness or accident, you become disabled and are unable to work. In some countries this kind of insurance is mandatory. Companies should have a collective policy that covers employees. Otherwise, the employers should take the initiative.

Is it important to have disability income insurance?

In order to answer this question, analyze the following:

• Do I have enough resources to subsist for six months without my regular income? How about for a year or five years? How about for my entire life?

If your answer to any of these questions is no, as it is for almost 99.99% of the people of your age, then you do need disability insurance.

What clauses should be considered when buying disability insurance?

A firm and clear definition. It is vital to understand how the insurance company defines “disability”. Some policies define it in specific terms as ‘an obstacle which prevents you from doing a regular activity’. Others use a general terms such as an obstacle to obtaining an income’. That means if you are able to earn money through a different activity, then you won’t be able to claim the insurance. Make sure that the policy covers disability by accident and illness.

Residual benefit clause. If you could work part-time and earn an irregular income, the policy will cover the remaining with the total income that is insured.

Presumptive disability clause. Even if you are still capable of working full time or part time, but you have lost your vision, hearing, speech or a limb, the policy will fully cover the insurance.

Benefit duration clause. The coverage could have different terms; it could only cover a few months, a year, two, five or until a specific age, usually 65. It can be for a lifetime. The most used policies are those with coverage until the age of retirement. The theory behind this policy is that the insurance must cover only the income you stop getting while you are actively capable of working.

Waiting period clause. The waiting period between the time of the disability and the moment the insurance begins to pay.