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 maximum Social Security disability benefits?

    The benefit amount for a recipient of Social Security Disability Insurance (SSDI) varies based on average lifetime earnings. Read Answer >>
  2. Is there a limit on the amount of disability insurance that I can buy?

    Disability insurance policies are designed to partially replace your income in the event that you become disabled and cannot ... Read Answer >>
Related Articles
  1. Financial Advisor

    How to Help Clients Who Have Become Disabled

    Disability can strike a client any time. Advisors should make sure clients are adequately insured against this risk and know what benefits are available.
  2. Financial Advisor

    Disability and Business Overhead Coverage for the Self-Employed

    What every small business owner or professional needs to know about individual and business overhead disability income insurance plans.
  3. Insurance

    Group and Individual Disability Insurance: What You Need to Know

    What you need to know about group and individual disability income coverage.
  4. Financial Advisor

    How to Manage SS Disability & Retirement Benefits

    Advisors with clients who receive disability benefits can carve out a profitable niche by helping them integrate this income into a financial plan.
  5. Financial Advisor

    How Do Workers' Compensation Benefits Work?

    What you need to know about Workers' Compensation benefits.
  6. Retirement

    3 Ways to Get Social Security Benefits

    Social Security isn't just for retirement. Learn about all three benefits provided by the Social Security Administration: retirement, survivor and disability.
  7. Insurance

    Why Your Company Insurance Coverage Isn’t Enough

    Even if you have group life or disability insurance, it pays to have individual coverage too.
  8. Personal Finance

    CFPs: The Quarterback of a Financial Team Part 1

    In the event of an illness or injury, a CFP can play quarterback in helping you get benefits owed.
  9. Retirement

    Social Security: More Than Retirement Benefits

    Social Security offers a lot more than just retirement benefits.
  10. Insurance

    Critical Illness Insurance: Get Paid If You Get Sick

    This coverage will allow you to focus your attention on getting well, rather than getting by.
RELATED TERMS
  1. Any-Occupation Policy

    Any-occupation policy is disability insurance where the insured ...
  2. Disability-Income (DI) Insurance

    Disability income (DI) insurance provides supplementary income ...
  3. Concurrent Periods

    A period of time in which more than one injury or disability ...
  4. Disability Insurance Trust Fund

    An account within the Social Security Trust Fund used to pay ...
  5. Credit Insurance

    Credit insurance is a type of insurance that pays off one or ...
  6. Elderly and Disabled Credit

    A non-refundable tax credit available for taxpayers who are aged ...
Hot Definitions
  1. Return On Equity - ROE

    The profitability returned in direct relation to shareholders' investments is called the return on equity.
  2. Working Capital

    Working capital, also known as net working capital is a measure of a company's liquidity and operational efficiency.
  3. Bond

    A bond is a fixed income investment in which an investor loans money to an entity (corporate or governmental) that borrows ...
  4. Compound Annual Growth Rate - CAGR

    The Compound Annual Growth Rate (CAGR) is the mean annual growth rate of an investment over a specified period of time longer ...
  5. Net Present Value - NPV

    Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows ...
  6. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing a company that measures its current share price relative ...
Trading Center