Disability insurance pays you a monthly income when you are unable to work due to injury or illness. Disability insurance is the only type of insurance that protects your earning potential. You have probably known a friend or relative who has suffered through a major injury or illness and came close to being bankrupt as a result. Disability insurance is designed to protect you from such occurrences.

Who should purchase disability insurance?

The best candidates for disability insurance are self-employed people and people whose employers do not offer group disability plans. If you own your own business and rely on the income that you generate personally, you need disability income insurance. If you are unable to work, how will you be able to pay your mortgage or car? If your employer does not offer disability income, how will you pay your bills if you have a protracted illness?

How do you buy disability insurance?

There are a number of features you need to know about disability insurance:

Elimination Period - The elimination period is the amount of time that must expire before a disability check is issued. The longer the period of time you choose the cheaper the policy. For example, if you choose a 180-day elimination period, you must wait close to six months before you receive a check. If you don't have six months worth of savings to pay your bills until you satisfy your elimination period, the disability insurance will be worthless to you. Therefore, you need to be realistic about how long you can last before you need the disability check. For many people, 90 days is the limit.

Benefit period - This is the length of time that you will be entitled to receive a monthly benefit. Disability insurers usually offer the following benefit periods: 2 years, 5 years, age 65. So when you buy disability insurance, you buy it for a period of time. If you buy a two-year benefit and end up being permanently disabled, you will only receive benefits for two years. Monthly Benefit - This is the monthly amount of income that you will receive from your insurer. Usually, the insurer will insure up to 66.6% of your monthly income. For example, if you earn $3000 per month, the insurer will only agree to pay you up to $1998 per month. Finally, The benefit period and amount of benefit you can purchase will be determined based on your occupation. For example, if you are a carpenter , you are more likely to be injured and disabled than if you are a software engineer. Insurers will be less likely to offer a longer benefit period if you are in an occupational class that may be prone to disability claims.

Disability income insurance is not cheap, yet it is essential protection that will prevent financial ruin.

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