Disability Income Insurance for Individuals
American Insurance Group, LLC offers access to insurance products from the top “A” rated companies in the industry that provide value and long-term protection for your family. We make it simple and convenient for you to obtain coverage. Your personal broker can help you decide what is suitable for you. We also offer a range of insurance products that may be appropriate for your long-range financial goals. Your personal broker can help you decide what is suitable for you.
Who needs a disability income insurance product?
Did you know that nearly half of all foreclosures are due to a disability? At the age of 25, your chances of having at least one long term disability that will put you out of action for three months or more before you reach the age of 65 is 44%. Those are pretty high odds. 35? A 41% chance of long term disability! It doesn’t go away as you get older, either. One in seven people will be disabled for at least 5 years before reaching age 65. Although we often insure against death, disability is twice as likely to happen to people between the ages of 25 and 50. Unless you are prepared for it to happen, financial stress can be added to the pain of your disability.
How Does It Work
Disability Insurance replaces a portion of your income if you become disabled and are no longer able to work. A typical group plan offered by an employer will replace up to 60% of your salary. Supplemental plans and individual policies will often cover up to 70% or 80%. (No plan will cover all of your salary for fear you will have little or no incentive to get back to work.) Benefits typically last for a set number of years (say five years) or until you reach retirement age. (Benefits typically stop around retirement age since once you retire, you would no longer be dependent on the income you generated by working, anyway.) If you pay the premium out-of-pocket — meaning your employer doesn’t cover the tab — benefits are tax free.
Long term disability policies vary greatly. While some are iron-clad and pay benefits when you need them, others have more holes than a pasta strainer. Folks trying to save some money with a leaner plan may find it ultimately worthless. Typically, the cheaper plans have very strict definitions of disability, making it difficult to claim benefits over many years.
Short-Term vs. Long-Term Disability Insurance
What’s the difference? Short-term disability insurance — also known as sick leave — kicks in as soon as you’re unable to work due to an illness, injury or the birth of a child. Most employers provide some type of coverage, ranging from just a few days to as much as one year. In some cases, the number of weeks you’re eligible for this benefit is based upon how many years you worked at a company. The longer your service, the more paid sick leave you’ll get.
Five states require employers to provide short-term disability. Hawaii, New Jersey, New York, and Rhode Island mandate most employers provide 26 weeks of coverage. In California, employers are obligated to offer 52 weeks.
Long-term disability insurance kicks in once your short-term disability benefits run out. Unfortunately, there are no state laws that require employers to provide long-term disability, but it’s estimated that half of all midsized to large firms do provide at least some insurance.
If you do decide to buy an individual long-term disability plan or to supplement your employer-based insurance, be sure to find out how much short-term disability coverage you have. There’s no reason to pay a premium for a long-term disability policy with a short elimination period of, say, 60 days when you have short-term coverage for six months.
How can the benefits be used?
From buying the everyday basics to the extras, you can use your disability income benefits to help:
- Pay your mortgage or rent
- Pay utilities
- Make car payments
- Pay doctor bills and other insurance premiums
- Buy groceries
- Maintain your standard of living
Your personal advisor can help you decide what is suitable for you, and provide details for specific products offered.