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Disability Insurance 101

What is disability income insurance?
Disability income insurance provides you with replacement income if you are unable to work due to an illness or injury. Disability income insurance can help cover your medical bills, your house payment and other monthly expenses.

What's the benefit to having disability income insurance?
One of your most valuable possessions is your ability to earn a living. Take away your income and it's amazing how quickly you could incur large debt -- just trying to cover your regular monthly expenses.

Plus, as an individual disability income insurance product, it is "portable." That means you own the policy and it stays with you even if you change jobs.

What are the different types of disability income insurance?
Disability income insurance policies typically come with one or more of the following features:

  • Non-cancellable: Guarantees that as long as you pay the premiums, your disability insurance policy can't be cancelled and typically locks in the premium rate for a set number of years.
  • Guaranteed renewable: For short-term needs, this policy guarantees that you can renew the policy with the same benefits as long as you continue to pay the premium. There is the possibility that your premium will increase.
  • Yearly-renewable term: For short-term needs, this type of policy has a scheduled annual premium increase.
  • Participating policies: Provides the company may declare a dividend depending on the company's claims, experience that year, earnings on the company's investment and company's operating expenses. Dividends are not guaranteed.

Who needs it?
Whether you're single, married, have children or own a business, a disability that keeps you out of work can be costly. To continue your standard of living in the case of a disability, it's important to have this coverage.

You might like to know ...
Insuring against disability has not been a high priority for most workers because many assume they're already covered through Social Security, Workers Compensation or employer plans.

You might be surprised to find out that only 39 percent of the 2.1 million workers who applied for Social Security disability benefits in 2005 were approved. And, 90 percent of disabilities are not work related.

Your questions answered ...

Q: I have disability coverage through my employer ... is that enough?
If your employer offers disability coverage, take the time to find out if it's sufficient to meet your income replacement needs. If it's not, you can purchase coverage on your own. One of the benefits of individual coverage is that it can follow you even when you change jobs.

Q: How much disability income insurance do I need?
Find out how much disability income insurance you may need by using this simple calculator (from Life and Health Insurance Foundation for Education), or by discussing your situation with us.

The product features, benefits, risks, and coverage availability and limitations associated with a particular disability income insurance policy will vary from product to product and from state to state.

Links to outside resources that are provided throughout this website are provided for educational purposes and strictly as a courtesy. Since we do not control the content presented in these materials we make no representation as to their completeness, accuracy or applicability to your circumstances. Please consult your won professional advisors regarding all personal finance issues and before implementing any strategies that may be presented or suggested in these resources.