Disability Income Insurance
Disability Income insurance is designed to insure one’s loss of income in the event of a disability. Insuring earned income is the foundation to every successful financial plan.
Disability insurance can be purchased individually – or offered through one’s employer in the form of Short Term Disability (STD) and/or Long Term Disability (LTD) group coverage. Each program has specific maximum benefit replacement ratios which typically cap benefits at 60% of one’s gross monthly earnings with maximum monthly benefits often inadequate to properly insure incomes in excess of $250,000.
Group benefits may be taxable benefits when received if funded by the employer. Individual benefits are usually designed to be non-taxable – funded by the individual.
Maximum monthly disability benefits can be achieved by implementing individual disability income contracts to supplement group/employer sponsored coverage.
This “combination” of individual and group disability coverage enables the highly compensated, business owners, key employees, etc. to design disability coverage which could insure incomes in excess of 60%.
Individual disability income contracts have very liberal definitions – one is considered disabled if he/she is unable to perform the main duties of his/her occupation.
Benefits are payable for both total and/or residual (partial) disabilities.
Individual disability contracts can be provided and paid for by the employer for a select group of key employees. They can also be offered to any group of employees on a voluntary basis as part of one’s benefit program. Typically, when 3 or more participate in purchasing individual coverage, premium discounts are available and simplified underwriting may be available.