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. Does dental insurance cover implants?

    Dental implants have become a widely used procedure in dentistry. Despite their popularity, however, they tend to not be ... Read Full Answer >>
  2. Does dental insurance cover dentures?

    Most full dental insurance policies include some restorative coverage, usually meaning that up to 50% of the cost of dentures ... Read Full Answer >>
  3. Can CareCredit be used for family members?

    CareCredit has become a widely used option when it comes to paying for medical procedures, primarily procedures not typically ... Read Full Answer >>
  4. Can a Flexible Spending Account (FSA) be used for dental?

    Flexible Spending Accounts (FSAs) can be used to pay for dental expenses including deductibles and co-payments with pretax ... Read Full Answer >>
  5. Does dental insurance cover braces?

    Most regular dental plans cover little to none of the costs of braces. The primary focus of regular dental plans is prevention ... Read Full Answer >>
  6. Does dental insurance cover crowns?

    Dental insurance coverage may vary according to the type of plan and the level of benefits that you have elected. Most dental ... Read Full Answer >>
Related Articles
  1. Investing

    How To Make Sure Your Healthcare Costs Do Not Ruin Your Retirement

    The best proactive plan of action for a stable retirement is to understand medical costs, plan ahead, invest properly, and consider supplemental insurance.
  2. Products and Investments

    Cash Value vs Term Life Insurance: Which is Best?

    The debate between cash value life insurance and term insurance plus an investment plan is an ongoing one. Here's a look at both sides of the argument.
  3. Your Practice

    How to Save for Retirement Like a Wealthy CEO

    Don't have a CEO's income? You can still employ a millionaire’s saving strategy when it comes to planning for retirement.
  4. Insurance

    Getting Your (Insurance) House in Order

    From starting a family to retirement, insurance can play a role in taking care of financial needs. This piece looks at some of the choices you can make.
  5. Insurance

    Jan. 31 is Sunday: Almost No Time to Duck Obamacare Penalty

    If you don't have health insurance, act NOW or you could owe penalties on your 2016 taxes, in addition to this year's.
  6. Term

    Is Term Life Insurance the Right Choice?

    Term life insurance is a policy with a limited coverage period.
  7. Insurance

    How High-Deductible Health Plans Work

    It will give you access to a Health Savings Account, but are the limitations worth the benefits?
  8. Insurance

    Cashing In Your Life Insurance

    In tough economic times, tapping into a life insurance policy can provide a needed source of funds.
  9. Entrepreneurship

    Becoming An Insurance Agent

    Life insurance protects families, employers and others from financial loss in the event the insured individual dies.
  10. Insurance

    3 Reasons To Get High-Premium Health Insurance

    Health insurance is expensive, which is why many people opt for the lowest-premium plan. But that may not always be the cheapest.
RELATED TERMS
  1. Limited Purpose Flexible Spending Arrangement (LPFSA)

    An employee benefit, used with a Health Savings Account, that ...
  2. PLUS Loan

    A low-cost student loan offered to parents of students currently ...
  3. High-Deductible Health Plan - HDHP

    A health insurance plan with a high minimum deductible that that ...
  4. Deferred Compensation

    A portion of an employee's compensation that is set aside to ...
  5. Crowding Out Effect

    An economic theory stipulating that rises in public sector spending ...
  6. Comprehensive Glass Policy

    An insurance policy that covers glass that has been broken or ...
Trading Center