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 are the restrictions for naming a given individual as my contingent beneficiary?

    Understand what restrictions may exist, depending on your state and the policy you choose, on naming your life insurance ...
  2. What debt/equity ratio is typical for companies in the insurance sector?

    Learn about the average debt-to-equity ratio among insurance providers. Find out about the ranges of D/E among insurers and ...
  3. How does the risk of investing in the insurance sector compare to the broader market?

    Discover the risks of investing in the insurance sector compared to the broader economy. Insurance stocks thrive when short-term ...
  4. What is the main business model for insurance companies?

    Read about the most important components of an insurance company business model, such as risk pricing, float investing and ...
RELATED TERMS
  1. Distribution Clause

    An insurance policy provision which determines how the coverage ...
  2. Insurance Consortium

    A group of businesses or organizations that join together to ...
  3. Aggregate Excess Insurance

    An insurance policy that limits the amount that a policyholder ...
  4. Fronting Policy

    A risk management technique in which an insurer underwrites a ...
  5. Excess Of Loss Reinsurance

    A type of reinsurance in which the reinsurer indemnifies the ...
  6. COPE Insurance

    A set of risks that property insurance underwriters review when ...

You May Also Like

Related Articles
  1. Active Trading Fundamentals

    Who are Berkshire Hathaway's (BRK.A) ...

  2. Investing Basics

    Which insurance companies pay the highest ...

  3. Stock Analysis

    How UnitedHealth Group Makes its Money

  4. Economics

    How Big Data Has Changed Healthcare

  5. Retirement

    Equity Vs. Salary: What You Need To ...

Trading Center