Disability Insurance Personal Finance

Definition of Disability Unable to engage in the important duties of your occupation Can’t do your job anymore Unable to engage in he important duties of any occupation for which you are reasonably suited for Can’t work at any job Of course, premiums for the first definition will cost more Some policies use the first definition for five years and then switch to the second definition Social Security uses the second definition Some policies reduce your benefits if you qualify for S.S. disability benefits

Disability Insurance You can never get disability insurance to fully replace your income Moral hazard problem Premiums are based on your age, sex, health, and occupation Good disability insurance is not cheap Benefits are usually stated as a monthly income lasting: For five years Till age 65 Lifetime Benefits are tax-free if the premiums were not tax deductible You are (statistically) more likely to become disabled than to die