12 facts you should know about disability insurance
Most working Americans’ greatest assets are not their homes, nor their pensions, nor even their health and fitness, it is their human capital; their ability to work and produce an income over their lifetimes. When family breadwinners die (prematurely), their families are left to fend for themselves without the breadwinners’ financial support, unless of course, the families havelife insurance policies on the lives of the breadwinners that will pay death benefits sufficient to replace the lost incomes.
As bad as an early death of a breadwinner may be to a family, it actually can get much worse, at least in financial terms. When breadwinners suffer serious long-term or permanent disabilities, their families not only lose their breadwinners’ income streams, but also, in contrast with when the breadwinners’ die, they continue to incur the direct and indirect costs of feeding, clothing, housing, and caring for (which often involves additional uninsured medical expense) the disabled breadwinner. Although the problem is less severe, even single workers must worry about how they will support themselves in the event they suffer a serious disability. Basically, disability is a double-whammy risk that has led some in the insurance industry to describe such serious long-term or permanent disabilities as a living death.
Disability Income (DI) insurance is living death insurance designed to provide benefit payments (salary replacement) when the insured individual is unable to work due to a disability. Disability may result from either an injury or an illness. DI policies have an elimination period, or waiting period, until benefits commence after the insured becomes disabled. The waiting period is often 90 days, but policyowners usually can elect shorter or longer waiting periods with corresponding changes to premium charges. Insurers usually limit the benefit payments to an amount less than 100 percent of the individual’s salary, typically about 60 percent to 65 percent of income.
Individuals may acquire their disability income benefits through agroup insurance plan provided by their employer or they may purchase it as an individual policy. Although disability income policies offered by different insurers have similarities, they also differ in substantial ways from one policy to the next. Disability income policies are contracts and the provisions within may vary. Before purchasing a disability income policy, the potential policyowner should carefully review and understand the policy’s provisions.
Q: What definition of disability does the government use to determine one’s eligibility for disability benefits under Social Security?
A: Disability for Social Security purposes is defined as the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a period of at least 12 months or longer. This is a fairly difficult definition to meet because it requires that disabled individuals be so severely disabled that they not only be unable to work at their previous occupations or professions but be unable to engage in any kind of gainful employment at all.
Q: What is the regular care and attendance of a physician requirement?
A: Generally, an element of meeting the definition of disability under a disability income policy is that the insured person must be under the care of a qualified physician in order to continue to receive disability income benefit payments.
Q: Are disability income benefit payments subject to FICA and FUTA tax?
A: Payments made to disabled employees by either an employer or an insurer are subject to social security tax (FICA) and federal unemployment tax (FUTA) for the first six months after the last month in which the employees worked for their employers. After six months, such payments are exempt from Social Security and federal unemployment tax. However, if the employees contributed to the plans that pay the benefit payments, the portion of such payments attributable to the employees’ contributions is not subject to Social Security tax...
Read the full article at Life Health Pro
http://www.lifehealthpro.com/2014/04/30/12-facts-you-should-know-about-disability-insuranc
0 comments: