Disability insurance, also known as income replacement insurance, is the most overlooked coverage. Insurance carriers report that approximately 40% of working people will experience a disability resulting from an accident or illness and lasting 90 days or longer during their working lifetime. The average length of a disability that lasts at least 90 days is five years. A leading cause of home foreclosures is the disability of one of the wage earners. Disability insurance can be purchased on an individual basis, a group basis, or a combination of the two. You can expect to pay 2-3% of your income to cover this risk.

Individual Disability Insurance
Individual disability coverage is just as it sounds. It is coverage that an individual or company purchases to protect the income of one individual. The insurance carrier requires complete health underwriting. If you qualify for coverage, the quality of the contract is the best available with the strongest guarantees and it cannot be taken away from you except for reason of non-payment.

Group Disability Insurance
Employers may offer group disability insurance to their employees. Most industries and professions can obtain group coverage with a minimum of three employees. The cost per employee is far less than the cost of individual policies, which makes it very attractive to employers. The guarantees differ from carrier to carrier and with the size of the group. Insurance carriers usually offer both short and long-term disability coverage’s. Employers can select several options to best fit the needs of their employees. Many benefit experts believe that it is negligent for an employer not to offer a long-term disability benefit to employees.

Voluntary Plans
These are dental, disability or life insurance plans that are employer sponsored and employee paid. Generally, a percentage of the total number of employees, or a minimum of 10, must participate. The rates are a little higher than non-voluntary plans, but still offer a reasonable supplement to existing coverage.

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