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Introduction | Tax Advantages | Protection | Compensation | Social Security | Disability FAQs
When a disability leaves you unable to work for an extended length of time, you lose the ability to earn an income- the one thing you've always relied on to provide for yourself and your loved ones. Meanwhile, your living expenses continue-in fact, they're likely to increase for a number of reasons. You could need help around the house or have higher medical expenses, for example. That's where disability income insurance (DI) comes in. It's designed to help you maintain your standard of living when you cannot work. If you don't have much in the way of assets for a financial cushion, you need enough to cover costs and supplement your income until you can go back to work.
Disability income insurance is needed by just about everyone who earns a living. Surprisingly, single people often need it more than married couples because they don't have a spouse's income to fall back on if they are injured or become too sick to work. On the other hand, most married people have a hard time imagining what it would be like to live on one salary when they barely get by on two. And unfortunately, disability strikes more often than you may think.
 Protecting Your Greatest Asset: Your Income
When you buy an individual DI policy, the annual premiums you pay are not tax deductible. If you collect the benefits, however, the money you receive will not be taxed. When you purchase disability insurance through your employer, you may be able to have premiums deducted from your pay on a pretax basis. If this option is available, you lower the amount of earnings your employer reports to the IRS and thus your current income taxes. The downside is that any benefits you get are considered taxable income.
Protection Through Your Employer
If you work, your employer may provide disability income insurance—or group coverage. Group coverage is less expensive than individual, or private, policies, but it won't pay as much as your salary. So if the coverage won't provide at least 60% of your income, won't pay benefits up to age 65, and has a waiting period longer than your savings will keep you afloat, you'll probably need private insurance, too.
It's likely that you already have a small amount of disability income insurance through Workers' Compensation. Most employers are required to provide this coverage, but it only pays if your disability is job-related, which means you're out of luck when it comes to sickness or off-the-job injuries. While the amount and duration of benefits varies by state, typically they are short-term--lasting for a few years at most--and the payments are low. That's why it's not very practical to consider workers' compensation when evaluating your protection needs.
Social Security also offers some disability income insurance. But beyond the many restrictions placed on who can qualify, the amount Social Security pays probably won't be enough for you or your family to maintain the standard of living you're used to. So it's not usually wise to rely exclusively on Social Security benefits when determining the amount of DI protection you'll need.
FAQs on Disability Insurance
What is the Definition of Disability?
Disability is considered either "Own Occupation," which is the inability to perform the duties of your own specific occupation, or "Any Occupation," which is the inability to perform the duties of any job for which your education and training qualify you.
How Much is the Benefit?
Most policies have a fixed monthly benefit. Although the benefit doesn't increase over time, you can usually purchase extra coverage or cost of living increases.
When do I Receive the First Benefit?
There is a waiting period between the time you become disabled and the time you begin to receive benefits. Waiting periods can range from one week to two years. In general, the longer the waiting period, the less the policy costs.
How Long Will the Benefits Last?
The benefit period, which is how long you receive monthly benefits, can range from six months to the rest of your life, depending on what your company offers and the choices you make.
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Business owners, professionals and high-income executives have more at risk if they become disabled. With ProVider Plus*, offered through our wholly owned stock subsidiary, the Berkshire Life Insurance Company of America, you get some of the highest quality individual DI protection around, plus many hard-to-find features. Read more about lifestyle protection products on Berkshire Life.
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