Do You Insure Your Pay Check?

by Anna Glendenning | More from this Blogger

06 May 2006 11:33 AM

Most of us insure our homes, cars, and even our lives. But what about one of the most valuable assets - Our paychecks? I don't think anyone ever expects to become disabled or unable to work due to sickness or injury until we are faced with the situation in our own lives. We don't plan to have an accident or a serious illness and not being able to work or run our own businesses. When it does happen Disability Income Insurance may help to insure the income our families need when we need it the most.

People who have earned enough wage credits through work or self employment contributions may have some disability income from Social Security Disability. Some employment benefits packages may include additional disability insurance coverage. Individuals may also purchase disability income insurance.

There are three basic types of disability insurance:

• - Own Occupation disability insurance is a plan which doesn't penalize the insured if they go back to work in a different occupation while a disability claim is open. With this type of plan, if someone can't continue to work in their occupation because of illness or injury they are considered totally disabled.
• - Income Replacement disability insurance will penalize a person for deciding to return to work or any kind, or earn another source of earned income while a disability claim is open.
• - Gainful Occupation disability insurance allows the insurance company to determine whether or not someone is disabled. These policies are often more difficult to negotiate claims with insurance companies and generally have a lot of limitations and conditions.

Individual disability insurance is an important part of risk management and financial planning. Designed to replace between 45-60% of your gross income on a tax-free basis if illness or injury prevents a person from working in their occupation to earn an income.

Disability insurance policies may vary from insurance company and every policy could be different. When shopping for Disability insurance it's most important to know what risks you want to cover and not simply shop for the lowest rates. A person might be throwing away their money if they buy the cheapest disability insurance policy on the market. It may be much harder to collect a monthly benefit under a cheap insurance contract than receiving benefits with the correct type and amount of disability insurance coverage.

Related Articles:

• Top 5 Reasons to Never Buy Credit Protection Insurance.

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