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Buying Auto Insurance (part 4 of 4)
Continued from part 3. Think About it: You Need to Buy Insurance to Protect Yourself, Passengers, and Family Members by Purchasing Underinsured Motorist Coverage (part 4 of 4) One serious mistake is to decline UIM coverage. Some companies require...
Finding fast life insurance
Since the widespread growth of internet usage and database building it’s never been easier or quicker to find fast life insurance. There was a time not long ago that the project could drag out forever. The process began with phone colds and lots of...
Health Insurance 101 for Individuals and Families
The changing healthcare and health insurance landscape in the United States has resulted in more individuals and families purchasing health insurance coverage on their own. Rather than touch on the number of reasons why this is the case, I would...
Home insurance aspects
One should never shy away from ensuring the security of one’s dream home by providing it with a home insurance coverage shield. Homeowners insurance covers more than only the structure of the house by protecting the homeowners and anyone named on...
Life Insurance Information
Life insurance is a personal insurance plan designed to pay out a sum of money on the death of the policyholder. Life Insurance is an insurance that is taken out against a persons life. It will pay out either a lump sum or monthly contributions to...
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Quick Facts on Disability Insurance
Quick Facts About Disability Insurance
§The sole purpose of individual disability insurance is to replace your after-tax income in the event of an accident or illness. These policies do not provide protection from medical expenses or recovery of damages for “pain and suffering”.
§Since the benefit payments are designed to be income tax-free, insurance coverage in the amount of 2/3 of your salary is roughly equivalent replacing your net take-home pay. This is usually the maximum amount of insurance that you can purchase.
§Be prepared to show the insurance company a pay-stub is you are salaried or an income tax return if you are self-employed to prove the amount of insurable income.
§If you are self-employed, you can only insure the amount of net income that you reported on your tax return, even though your actual earnings might be much higher. In this case, you might want to supplement your insurance with “business overhead coverage” that does not depend on net income.
§Expect the insurance policy to exclude or limit coverage for pre-existing conditions. If you have a bad knee, for example, expect that your policy might have a 5 year rider on claims due to knee injuries.
§Most policies are issued for a term of five years of coverage, although you can buy a longer or shorter benefit amount.
§Most policies have a 90 day waiting period before you can begin collecting a benefit, but you can buy longer or shorter waiting periods.
§Most policies integrate with Social Security disability insurance. This means that the total amount of the benefit you collect will not exceed your net after-tax income before you were disabled.
§Most policies may be continued year after year
until you retire. But the average life of a disability insurance policy is about 5 years.
§The average time required for an insurer to review an application is about 3 weeks. The insurer may request copies of medical and financial records.
§Applications are still submitted on paper; no online enrollment system is available.
§Expect the premium cost to be about 2% of your salary if you have a “desk job” and about 4% of your salary if you work with your hands. Of course, this is a very rough guideline, and the actual cost will depend on a greater number of individual factors.
§When a policy is issued, you have at least 10 days to review all of the details and cancel the coverage if you are not completely satisfied. It may be useful to have an independent financial adviser review the new policy during this period.
§Assuming that you keep disability insurance for the balance of your working career, the probability of suffering a loss of income due to accident or illness sufficient to trigger a claim under your policy is about 1 in 4.
§If you become disabled, you should consult with an attorney who specialized in disability insurance claims before filing a claim with the insurer. This may help avoid delays and disputes regarding the claim.
About the Author
Tony Novak, MBA, MT, is a financial adviser based in Narberth, Pennsylvania. He is editor/publisher of “Tax and Benefit News” and moderator of the tax forum for financial planners at “Financial Planning Interactive”. He is available by telephone at 1-877-529-7435 to address public inquiries on tax and benefit planning issues free of charge through OnlineAdviser service sponsored by www.MedSave.com and www.FreedomBenefits.com.
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