How will you pay your expenses if you become disabled before retirement?
Your ability to earn an income is your most valuable asset. Your income is what pays for your everyday life expenses. Chances are, you are paying for either one or all of the following expenses: mortgage, utilities, vehicle, education, and insurance payments. So how will these expenses be covered if you contract a serious illness or get severely injured? Disability Insurance helps protect your income in the event of an illness or injury, and keeps paychecks coming in when you are too sick or hurt to make it to work.
Disability policies are often complicated with many different features and benefits that can be included or excluded according to your needs. Most policies will insure your income until you reach the age of 65 at a maximum, and are capable of paying a benefit equal to 60-70% of your average annual income. Depending on your profession, you may want to also insure your expected bonuses, commissions, or contributions to your retirement account. If you haven't reached your peak earning years, you may want to have the option of buying a higher benefit in the future without having to be medically underwritten over and over again as your income increases. You may be concerned about the effect of inflation, partial disability, or catastrophic disability. These coverage options are not automatically included in most disability insurance policies, which is why it is very important that you work with a trained expert to learn your individual needs and the terms and conditions of your policy.
Many people have disability benefits through work, which is an excellent first step to protecting their income. Keep in mind, these benefits are usually taxable as income when claimed, meaning your benefit could be significantly less than you might expect. Would you be able to pay your expenses if your paycheck was less than 50% of what it is now? Probably not. Having an individual disability policy can help bridge the gap and ensure that your income is not compromised.
As you consider the importance of disability insurance, ask yourself the following questions:
- How much take home cash does it take to run my house each month?
- In addition to that, how much do I save for retirement or education every month?
- How much after-tax disability income would I have if I couldn't work?
- What would I sacrifice first if I didn't have enough to pay for my regular expenses (mortgage, kids’ education funds, retirement funds, car-lease)?
Choosing the right disability coverage is important. In the event you become disabled, you will want to ensure that you and your family have enough coverage. A representative at Boynton Insurance Agency will look at the individual factors in your life and work situation and help design the best policy that meets your personal insurance needs.