Families that are financially strained, often times do not include disability insurance in their monthly budgets. The decision to allocate this insurance into their budget is pertinent, not only important to their future, but their families as well. It is highly recommend that individuals who are self-employed or have a hazardous occupation purchase disability insurance.
Disability insurance policies provide an alternate income should you find yourself unable to work due to illness or injury. There are two types of disability policies, short term and long term. Short term disability will pay a percentage of the policyholder’s salary for a specified amount of time, usually two years. This coverage starts between one and 14 days from the date that the policyholder is unable to …show more content…
The monthly premiums will vary depending on gender and age. Female monthly premiums range from approximately $50 to $110 per month. Male monthly premiums range from approximately $35 to $80.
When purchasing a disability policy it is recommended that a Cost of Living Adjustment (COLA) rider be purchased as well. With this rider, the amount paid out monthly will be increased the 13th month of disability to match inflation. The Consumer Price Index (CPI) is what the increase is based on.
An example of how this rider in relation to a disability policy would be, with a $1,000 per month total disability benefit along with a COLA rider the annual adjustment will be based on the CPI-U up to a maximum of 7% yearly.
The first year of disability the CPI indicated that inflation grew by 5%. Therefore, the inflation growth of the disability benefit will grow by 5% the second year. Consequently, the monthly disability benefit is 105% of the amount at which it began ($1,000 x 1.05 =
Disability insurance policies provide an alternate income should you find yourself unable to work due to illness or injury. There are two types of disability policies, short term and long term. Short term disability will pay a percentage of the policyholder’s salary for a specified amount of time, usually two years. This coverage starts between one and 14 days from the date that the policyholder is unable to …show more content…
The monthly premiums will vary depending on gender and age. Female monthly premiums range from approximately $50 to $110 per month. Male monthly premiums range from approximately $35 to $80.
When purchasing a disability policy it is recommended that a Cost of Living Adjustment (COLA) rider be purchased as well. With this rider, the amount paid out monthly will be increased the 13th month of disability to match inflation. The Consumer Price Index (CPI) is what the increase is based on.
An example of how this rider in relation to a disability policy would be, with a $1,000 per month total disability benefit along with a COLA rider the annual adjustment will be based on the CPI-U up to a maximum of 7% yearly.
The first year of disability the CPI indicated that inflation grew by 5%. Therefore, the inflation growth of the disability benefit will grow by 5% the second year. Consequently, the monthly disability benefit is 105% of the amount at which it began ($1,000 x 1.05 =