Disability Insurance Articles
Three Benefits Included In Purchased Disability Insurance
2010-09-04
Establishing financial security for any event should be a priority for all. Many people plan for death but fail to plan for possible disability. A temporary or permanent disability can occur at anytime. Disability can force an individual to take leave without pay from their job. In a nutshell, disability insurance protects you financially while on a medical leave without pay. A medical leave from work may be needed while recovering from a surgery, having a baby or recovering from injuries related to an accident. Meanwhile, bills are still expected to be paid on time. During this time medical coverage is often ended as well. The payments received would help cover various expenses. Although receiving a monthly check is the major feature of disability insurance, there are three coverage benefits worth noticing.
The monetary benefit for an approved disability is generally tax free as long as premiums were paid with previously taxed income. This means no tax deductions from the monthly disability benefit. If the policy states the insured will receive $800 per month, the insured will receive $800 per month. If the policy states the insured will receive $1000 per month, the insured will receive $1,000 per month. Regardless of the benefit amount the monthly income benefit is still tax free. In addition, the money income benefit is generally non-taxable income on the yearend tax statement as well.
Except for income from Social Security Disability or Worker's Compensation, the coverage benefits of purchased disability insurance entitle the insured to receive payments regardless of any other income. However, the monetary benefit may be claimed in lieu of Social Security Disability approval. It can take several months for an individual to get approved and receive the Social Security disability benefits. Moreover, the purchased disability insurance monthly benefit is not based on the household income. It is usually 50 to 70 percent of the insured's normal pay as stated in the provider's policy. The insured would receive payments regardless of the spouse's income.
Unlike employer sponsored disability insurance, purchased individual disability insurance allows the insured to switch jobs without penalty. Transferring new employment information for an existing disability policy allows the insured to continue with the same coverage benefits already in place. This holds true whether an individual resigns or whether an individual is laid off.
The benefits of disability insurance vary depending on the insurance company's policy. Most companies offer Option Riders that allow the insured additional benefits. Regardless of the coverage benefits the overall benefit of disability insurance is the financial security of having a source of income during a medical leave. Disability insurance is a wise financial security decision for all.