About Disability Income Insurance...
Disability income insurance pays a benefit when someone is unable to work. To be more specific, benefit payments are triggered by loss of income as a result of accident or sickness. As with life insurance, there are several types of risk management needs which can be satisfied by this financial planning tool. Here we will discuss the personal income loss due to disability need, which is similar to the survivor income need discussed in the life insurance page.
Personal income loss due to accident or sickness.
What is the potential cost (amount of income lost) to a disabled person and his/her dependents? According to the 2000 U.S. Census Bureau report, the median annual earned income in the United States in 1999 was $41,994. Therefore, if an average income earner suffered a disabling accident or sickness for a period of five years the potential loss would be $209,970, not counting increases due to inflation, seniority or promotions. Of course, an unexpected interruption of income for a period of months or years, could require that investments be liquidated prematurely, or could result in additional indebtedness or other setbacks, causing the actual cost to be greater. A disability lasting 10 years would cost an average wage earner $429,940.
There is much more to say about the risk of income loss due to accident or sickness and the insurance solution to this problem. Please return to this space again for more information.