The Insurance Industry is starting to modify its product line since the prices on Disability Insurance have soared. Here are some important issues to consider when purchasing your disability contract:
- Consider a longer elimination period (90 days or even longer).
- Consider buying a contract where you have a very good (own occ) definition of disability for 2-3 years and then a reasonable definition of disability for the rest of the disability.
- Consider buying a policy that provides income replacement (i.e., if your benefit is $3,000 monthly and you go out and earn $700 at something else, the contract only pays $2,300 - this could also be called integration).
- Consider buying a step-rated contract where the premiums are not locked in at the time of purchase, but can go up over time.
- Buy part of your disability insurance using a Social Security rider.
How Much Disability Insurance Should I Buy?
Generally, you should buy as much disability insurance as the insurance company will sell you. This will represent between 50-70% of your pre-disability earnings, depending on your income. If you are personally paying the disability insurance premium (using after- tax dollars), the disability benefit would be nontaxable. If you are deducting it through a corporation, the disability benefit would be taxable. However, insurance companies will usually sell you a higher benefit amount on a corporate pay policy. Buy as much disability insurance as you can qualify for, keeping in mind your needs and budget.
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Last Updated on Wednesday, 26 March 2008 13:48 |
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