Disability insurance is a type of financial protection designed to protect a person who is dependent on their income. At Montana Life Group we feel that disability insurance is one of the most important types of coverage a working person can have. Unlike workers compensation, disability insurance will actually pay a person an ongoing monthly income benefit for injuries or sicknesses that occur outside of the workplace.
Disability insurance is so often overlooked as an essential part of a financial plan. Most people depend on the income they receive from their job or business. What would happen if a person came down with a serious illness and had to miss work for an extended period of time? We all know that health insurance can cover the cost of expensive medical bills but where will the money come from to pay bills like mortgage, utilities, health insurance premiums, and other general costs of living like food and clothing?
Disability insurance can typically provide up to 60% of a person’s previous year’s salary as a tax free1 benefit that can continue for as long as a person is out of work or until a certain age (for instance until age 65). Let’s look at a disability insurance example:
A 39 year old non-smoker attorney in Billings, Montana is currently at work full-time and bringing in $100,000 per year. This person can probably qualify for a $5,000 per month disability policy if they are healthy. The monthly cost for this person’s disability insurance policy would be about $139 per month2 . If the attorney becomes ill and can no longer perform their duties as an attorney they would begin to receive $5,000 per month after 90 days and the policy would continue to pay $5,000 per month until the attorney returns to work or turns 65.
Of course this is a broad and simplified example, but it is a scenario many Americans face every year.
At Montana Life Group we focus on three types of insurance, all designed to provide financial security. While life insurance serves as protection in the event of death, the risk of a becoming disabled is far more likely3, therefore disability insurance is important to consider for any working individual.
- Disability benefits are tax free only if premiums are paid by the insured with after tax dollars
- Based on rates current as of 5/29/13 assuming a 90 day elimination period and age 65 benefit period with no additional riders
- Workers today are 3 times more likely to suffer a long-term disability than die during their working years (Source: The Council of Disability Insurers, The Long Term Disability Claims Review: 2005)
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