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Disability insurance: protecting your future

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Updated: 12/07/2012 10:53 am

(BPT) - - There is a common misperception that most disabilities are caused by accidents. In reality, the majority of disabilities are caused by illness. You might think it won't happen to you. And perhaps it won't. But in 2009, more than 15 million Americans experienced a disability that prevented them from working.

Disability insurance protects your most valuable asset - your income. This insurance pays a monthly benefit in the event of a disability - money that can be used to replace lost wages, manage financial obligations and maintain a standard of living. So, if you become disabled, you can focus on regaining your health instead of worrying about how to pay the bills.

Only 8 percent of Americans are protecting their financial security with a disability policy, according to a recent survey by Northwestern Mutual. It's never too soon to consider what would happen if you lost your income to illness or injury. Ask yourself how you would manage. Do you have a financial plan in place?

Maximize your income protection

You can maximize your income protection by supplementing a group disability policy you may have through your employer, with individual disability income insurance. Most group disability plans only insure a portion of your base salary and may not insure deferred compensation, commission income or regular incentive bonuses. And, the income received from a group disability plan is taxed as ordinary income - which means you're losing a portion of your reduced income.

Individual disability insurance (benefit not typically taxed) can help lessen the gap between the amount of income received from a group disability plan and your original income. It offers more comprehensive coverage and is portable, which means your policy stays with you as your employment changes.

What more should you consider when evaluating a disability insurance policy?

* Meet with an experienced financial professional. He or she can help you choose a disability solution tailored to your own personal financial security needs.

* Assess the company behind the product. Financial strength ratings are key indicators of policy performance and claims paying ability.

* Consider your long-term income needs. In the event of a disability, your policy should work within your larger financial plan to provide a steady stream of income - so you don't need to dip into your retirement nest egg.

Financial security planning is a lifelong process that starts with risk protection. And the risk of an unexpected disability can jeopardize your ability to earn an income, which is your most valuable asset. Protecting your income with individual disability insurance can provide lifestyle protection for you and your family, meaning you can feel more in control of your future.

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