Disability Insurance Articles

Understanding How Disability Insurance Can Help Keep a Family On Budget

2011-03-16

Making sure your family is properly insured has always been considered a key factor in maintaining your family's financial security. Most families maintain medical and life insurance policies to protect themselves. However, should you or your spouse become unable to work due to serious illness or injury, it's important to protect your assets. Disability insurance coverage is too often overlooked as a essential component of insuring your family. Studies have shown that you are more likely to become disabled than die during your working years. Rest assured there are a variety of disability insurance plans to fit any budget.

First, it's important to understand how disability insurance coverage works. Disability insurance protects a percentage of your income should either you or your spouse become disabled and therefore unable to work. 60 percent is the recommended benchmark of coverage for an individual. Additionally, there are two kinds of disability insurance plans: short-term and long-term. Short-term policies provide partial replacement of your income for a short time, generally two to 26 weeks, whereas 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.

Some employers and unions do offer limited disability insurance plans. Also, qualified individuals may receive disability coverage through Social Security. This coverage is limited, however, with a five month waiting period and the majority of initial claims denied. To protect your family's assets, even if you have other disability coverage, it's prudent to compliment your existing disability coverage. To save money and protect your family's budget it's key to comparison shop and get quotes from different insurance companies. You might be surprised by how much premium quotes from various insurance companies can fluctuate.

Typically disability policies cost one to three percent of your salary but there are many ways to save on the cost of coverage. Consider a shorter benefit period instead of a lifetime payout. Another way to cut premium costs is choosing a longer "elimination period." This means an individual would wait a longer time before the benefits would begin, generally three to six months. An added cost benefit is most disability income is tax-free as long as you pay the premium yourself. This is another reason why it's recommended to only insure for sixty percent of your current salary.

To protect your family's assets, considering disability insurance coverage is important to your financial health. There are a great many disability insurance plans out there which can cover your financial needs and don't need to break the bank. Understanding how disability insurance can help keep a family on budget.