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Is Your Income Protected?

Given today's economy, people are more concerned about finances than ever before. Even the lucky few not directly impacted by the downturn are trending toward fiscal prudence because no one knows what the future will bring.

You may have considered the possibility of being downsized, and that is anxiety-provoking enough. But have you thought about what could happen if you were disabled?

Each year, approximately one in every eight people becomes disabled. Adding to that misfortune is anxiety about the immediate consequences of income loss on hearth and home. Fortunately, disability insurance can relieve some of that anxiety. When you can't work because of illness or an accident, disability income insurance replaces 50 percent to 70 percent of your income.

Although the government provides base coverage to all workers, it can involve a lot of red tape. Many people get disability insurance through their employers, too, but your employer may not provide sufficient coverage for your needs.

Who really needs disability insurance?
  • Primary family wage earners
  • Self-employed professionals
  • Small business owners
In general, people who might not be able to maintain their lifestyle if their occupational income were interrupted should be concerned about having adequate disability coverage in place.

Who does not need disability insurance?
  • Retirees
  • Certain government workers
  • Part-time workers who don't rely on their own income
  • Individuals with sufficient investment income
If you are among the many who do not fall into one of these categories, keep reading!

How much disability insurance do you need?
The answer is based on your personal financial situation. A professional can provide an analysis that includes:
  • Cash flow
  • Other income sources
  • Future income needs
Once the amount of coverage is determined, the selection of a policy revolves around the definition of disabled each policy employs. To be considered disabled, you must be unable to work and earn an income at your occupation. Depending on the policy, however, you might also have to be unable to work at any another occupation.

Hence, the four distinct definitions of disability and four types of coverage:
  • Own-occupation coverage applies the most liberal definition of disability. It covers you if you are unable to perform the usual duties of your own occupation, even if you are still able to work. Only candidates with the least risk are granted this coverage—and they pay the most for it.
  • Any-occupation coverage applies the most restrictive definition of disability. It covers you if you are unable to work at any gainful occupation.
  • Split definition coverage combines both definitions, providing own-occupation coverage for a limited time before converting to an any-occupation policy.
  • Presumptive disability coverage protects you in the event of a catastrophic ailment that is utterly disabling. Benefits are paid even if you are able to earn a living. Catastrophic ailments include:
    • Loss of sight in both eyes
    • Loss of hearing in both ears
    • Inability to speak
    • Loss of use of both hands or feet
    • Loss of use of one hand and one foot
There are other considerations to keep in mind when purchasing disability insurance. A professional can help you explore your insurance options, and even if you cannot obtain coverage, he or she can work with you on a financial plan that allows you to feel safe no matter what tomorrow brings.

© 2009 Commonwealth Financial Network