A:

Disability-income insurance is insurance that provides financial benefits to a policyholder in the event of sickness or injury that inhibits the ability to work. Disability-income insurance is meant as a substitute of no more than 80% of income on a tax-free basis should illness keep you from earning an income in your occupation. Some things that must be considered before choosing disability insurance include:

a) whether there is a waiting period before income kicks in,
b) whether the policy covers short and long term disabilities, and
c) whether the policy covers disabilities resulting from accidents or illnesses.

Another source of disability insurance is the Social Security program. The Social Security Administration (SSA), which is responsible for retirement benefits, also administers disability benefits. Eligibility for SSA disability payments is based on being unable to perform any gainful employment and not the job that was being performed at the time the disability began. In other words, being a firefighter or a construction worker does not entitle one to higher disability benefits than people in other professions. Social Security disability payments are subject to federal income tax if your "combined income," adjusted gross income plus any nontaxable interest income and half of your Social Security benefits, exceeds certain limits. To find out more about SSA disability payments, go to socialsecurity.gov.

For more, see Critical Illness Insurance: Get Paid If You Get Sick.

This question was answered by Chizoba Morah.

RELATED FAQS

  1. What happens if my insurance claim falls below the deductible level?

    Find out what happens if your insurance claim falls below the level of your deductible, including the basics of deductibles, ...
  2. How is the deductible I paid for my insurance claim treated for tax purposes?

    Find out how your health insurance deductible is treated for tax purposes and under what conditions you may be able to deduct ...
  3. What are the main factors that impact share prices in the insurance sector?

    Learn about some of the main factors that impact share prices in the insurance sector. Insurance companies make money by ...
  4. Why do insurance policies have deductibles?

    Learn the basic concept of an insurance deductible and why they mitigate moral hazards and provide financial viability to ...
RELATED TERMS
  1. Comprehensive Glass Policy

    An insurance policy that covers glass that has been broken or ...
  2. Coastal Barrier Improvement (CBI) Act

    A federal law that makes federal disaster relief and federal ...
  3. Net Collections

    A term used in medical accounting to describe the amount of money ...
  4. Directors And Officers Liability Insurance

    Directors and officers liability insurance covers you if you're ...
  5. Corridor Deductible

    Expenses that are paid by the insured in excess of an insurance ...
  6. Distribution Clause

    An insurance policy provision which determines how the coverage ...

You May Also Like

Related Articles
  1. Personal Finance

    Three Perks Business Should Give Their ...

  2. Markets

    What Is the Pharmacy Benefit Management ...

  3. Insurance

    7 Industries Benefiting From Obamacare

  4. Insurance

    How Obamacare Affected The Insurance ...

  5. Personal Finance

    Top Healthcare Stocks Rallying Under ...

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!