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Disability Insurance

Hello. I’m Kevin McCormally with Kiplinger’s Personal Finance Magazine here to talk about disability insurance.

Quick: What’s your most valuable asset?

Did you think of your home? Or, if you’re a renter, maybe your car? Perhaps an investment portfolio . . . or that 401(k)?

Well, think again. It’s probably your ability to make a living. Think about it: If you make $75,000 a year, over 40 years, that’s 3 million dollars.

But what happens if illness or accident prevents you from working? You know, that there’s just over a one-in-four chance that someone in today’s working force may become disabled before reaching age 67*.

You undoubtedly insure your home . . . and your car. But what about insuring your ability to earn a living?

That’s what disability insurance is all about.

You may have some disability insurance at work. But benefits under an employer’s plan usually maxes out at 60% of your salary. And, benefits are fully taxable at your top tax rate. Would that leave you with enough to pay the bills if you were unable to work for an extended period?

If not, you may need an individual policy to fill the gaps. Figuring how much you need can be a challenge, but here’s some surprisingly good news: Benefits you get under a policy you pay for yourself come to you tax-free**.

Shopping for disability insurance is different than buying term life or automobile coverage. But with some homework and some trusted advice, you can get the protection . . . and some peace of mind . . . that you need.

*Social Security Administration Fact Sheet 2013
**Section 105(a) of the Internal Revenue Code

This information should not be construed as tax or legal advice. Consult with your tax or legal professional for details and guidelines specific to your situation.

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