Employee Life and Disability Insurance

Disability Insurance

Most of us plan to provide for our families through life insurance. However, despite the best of intentions, there is one important but necessary provision we tend to overlook.

During our prime working years (between the ages of 21 and 64), there is a better chance of becoming disabled than of dying. While death and disability are uncomfortable subjects, they require prudent financial planning none the less.

According to the Social Security Administration, three out of ten 20-year-old people will become disabled prior to the age of 65. Most people have not planned for this possibility. According to insure.com, 70% of Americans own life insurance policies, while a mere 40% own disability insurance policies.

Losing working income, even temporarily, can have serious and disastrous effects for a family.

Typical expenses include:

• mortgage payments and property taxes
• groceries
• car payments, car repairs, car insurance and gasoline
• utilities and home maintenance
• college tuition and student loans
• medical insurance and expenses and
• all other basic necessities of life

The purpose of disability insurance is to replace income when a disability prevents someone from working to earn income. The ability to work and earn an income is a person's greatest insurable asset.

From basic, no-frills policies to all-inclusive policies, the types of disability insurance are vast. Coverage affects the monthly benefit amount, when the benefit starts, coverage limitations, and the benefit period. There are two primary categories of disability insurance: long term and short term. In the next sections, we'll take a look at the basics of both.