Disability Insurance: Overlooked, But Vital

"The chance of being disabled for a younger person is far greater than dying. But people more frequently have their life insurance, but not their disability insurance, in place,

Who needs disability insurance protection? Disability insurance is necessary for anyone who needs to protect their earning power. We insure our cars, our houses, our life, but we often don’t insure our income."

What if you lose your income, what do you do?

Group vs. Individual: If there is a choice between a group and an individual policy, it is generally better to take the individual policy if it is affordable Admittedly the individual policy can be more expensive, but is likely to have more liberal options. An employer group does have a disadvantage. It may not be portable when the insured leaves that particular employment.

Multitude of Uses

The most common disability insurance protection purchased is when individuals buy it for themselves. For example, If you look at a business buy/sell agreement, you often see a provision that provides the agreement is triggered by death or disability, and frequently there is life insurance to fund that in the event of death. But there isn’t disability insurance to fund the buyout, which is certainly an omission,

There are many other instances when it should be considered. Some examples::

	Business overhead protection—The policy pays for business expenses when the business owner is out such as when a temporarily disabled accountant has to pay staff salaries while he or she is out.
	Key-person coverage—If a rainmaker becomes disabled, benefits can be paid to the business.
	Buyout to sole proprietor—If a buyer becomes disabled while paying out the former business owner in installments, then amounts still due are paid to the seller under the policy. An example would be an accountant/sole practitioner that sells his or her practice.

In addition consideration should be given to the purchase of business interruption insurance, a kind of disability insurance for businesses. It could come into play if there were a fire. He points out that kind of protection isn’t normally included in most business general liability coverage.

In the case of two-earner couples, the coverage is important on both spouses. "You are not just losing the income, but there also may be additional costs. For instance there might be a need for a caretaker, a nanny or even the possibility of making your home handicap accessible.

Tax Considerations

Frequently after tax dollars are used to ensure that the benefits will not be taxed and thereby effectively reduced. Therefore, it is sometimes advisable to add the cost of the premiums to compensation. Then any benefits received will not be subject to tax.

If the tax deduction is taken for the premium, the benefits usually end up being taxable.