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Protect Yourself from Accidents and Illness with Disability Insurance

While looking at which types of insurance coverage one should sign up with, many people come across disability insurance. This insurance is a supplemental insurance, and can be extremely beneficial to have. Statistics show that one in three Americans between the ages of 35 and 65 will become disabled for more than 90 days at some point in their life. One in seven will actually be disabled for more than five years. The loss of income during that time can be a devastating blow to any family or individual. Disability insurance can help you and your family should this ever happen.

Many believe that disability insurance is only good if there is an accident of some kind that causes you to become disabled. The majority of long-term absences from work are actually due to serious illnesses. Should you find yourself suddenly unable to work because of an accident or illness, disability insurance can replace a portion of your income. The typical plan offered by an employer will replace up to 60% of your salary, but there are supplemental plans available that will cover up to 70% or 80%. There are no plans that will cover all of your salary, as it would give you little incentive to try to return to work as soon as youíre able.

The benefits provided by disability insurance normally last for a set period of time, say a number of years. They will also stop when you reach retirement age, as you would no longer be relying on income received by working at that point. When the cost per month is paid out of pocket instead of through an employer, the benefits are tax-free. While it may be tempting to go with the cheapest plan available, oftentimes this can turn into a big mistake. Cheaper plans typically have very strict definitions and guidelines, making it extremely difficult to claim your benefits or to continue to claim them for an extended period of time.

Two different types of plans offered by disability insurance are group plans and individual plans. As previously mentioned, the typical group plan will cover approximately 60% of a personís income, though the amount you receive may actually be far less. Most group plans have a benefit cap, which limits the amount you can receive per month or per year. These plans normally exclude bonuses as well; only your regular salary is insured. Another thing to watch out for is the fact that many group plans will limit the amount of time it will pay benefits to two years. After that, you will have to be able to prove that you canít hold down any type of job at all in order to continue receiving your benefits.

The second type of plan is the individual plan. This plan is primarily meant for those that are self-employed or not covered by their employer, though some choose individual plans in order to supplement their current disability insurance. Purchasing an individual plan in addition to the coverage provided by an employer may allow an individual to cover another 10% to 20% of their current salary. In some cases, individual plans may even provide coverage for a six figure salary, something that one will not be able to get with a group plan.

Even if you donít think that youíll ever have to worry about disability insurance, it may be a good idea to purchase an individual plan or get it through your current employer. Once you have disability insurance in place, youíll know that if something should happen that causes you to be away from work for an extended period of time, whether because of an accident or illness, you wonít suddenly find yourself without any source of income.

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