Published October 24, 2016
Disability insurance is very important during your working years to protect your income stream in the event you cannot work due to injury or illness. The insurance is designed to replace a percentage of your earnings, not 100%. The replacement percentage is typically between 60% - 66%, as the insurers want there to be some incentive for plan participants to return to work. Benefits generally stop at retirement age (65), as they’re designed to replace earnings not retirement benefits.
Most disability insurance is provided by employers through group plans. However, group plans typically have an income limit cap that may fall well below 60% of income for a high income earner. In order to carry adequate insurance, a private policy can be purchased to cover the benefit gap and provide coverage up to 60%-66% of income.
It’s not enough just to buy a policy; It’s important to know that it will pay the benefits you expect when it’s needed the most. Each of these tips provides a vital piece of the disability insurance puzzle when you’re purchasing a disability policy.