Disability Insurance Articles

How To Maximize Benefits With A Disability Insurance Plan

2011-04-23

Studies have shown that one in eight Americans will become disabled at some point during their working years. Should either you or a spouse become unable to work due to serious illness or injury, it's important to safeguard your income with a solid disability insurance plan. Lost income from an extended forced absence can have a devastating effect on your personal finances. Disability insurance coverage is too often overlooked as an essential component of properly insuring your family. Rest assured there are a variety of disability insurance plans to fit any budget and several ways to maximize benefits.

First it's important to understand how disability insurance coverage operates. Disability insurance protects a percentage of an individual's lost wages should they become disabled and unable to work. Currently an individual can be covered for a disability under three separate plans: State or federal government protection, group disability offered through an employer, and individual disability plans. Individual disability insurance plans fall into two categories either short-term or long-term. Short-term policies pay a partial replacement of lost income for a short time, generally two to twenty-six weeks. Long-term coverage protects an individual for an extended period of time. This coverage is intended for significant illness and injury and therefore more expensive.

While many of us have disability coverage through an employer-sponsored plan, those benefits typically cover just 60 percent of lost wages, leaving you significantly under-protected. To illustrate, an employee earning $100,000 annually or $8,333 per month, would only be covered for $5,000 per month under a standard group plan. Additionally, most group insurance doesn't cover lost commission income, 401K payments, or deferred compensation. To account for these shortfalls and maximize benefits, many employees opt for additional private disability insurance coverage. Not only is it cost effective to do so but privately held disability insurance payments are also tax-free.

Many working Americans also qualify for disability coverage through social security. The advantage here is you're allowed to collect disability social security (DSS) benefits and individual disability income concurrently. It's important to note that disability social security benefits are only given for long term disabilities and payments typically do not kick-in for a minimum of six months. Yet another reason of being protected under an individual disability insurance plan is so crucial.

To protect your financial assets and maximize benefits it is important to understand the limits of both group disability insurance and disability social security coverage. There are a great many disability insurance plans out there that will protect your lost income in an emergency. Disability insurance coverage is important to your financial health and doesn't need to break the bank.