What is Disability Income Insurance?

Disability Income insurance is a type of insurance that can replace part of your income if illness or injury leaves you unable to work for an extended period of time.

Why Consider Purchasing Disability Income Insurance?
They say death and taxes are inevitable ... but what about disability?

Statistics show that more than 18 million people age 16 to 64 have had a work disability that either limited or prevented them from working. That’s nearly 10 percent of the working-age U.S. population. 1 Over the past 14 years, the percentage of disabled people who say they are unable to work (due to a disability) has risen from 29 percent to 43 percent. 2 Often we think of a traumatic accident as the cause of disability. Sometimes that happens . . . in the blink of an eye. But some of the top chronic conditions causing work limitation are back disorders (including orthopedic ailments and disk disorders), heart disease, osteoarthritis and respiratory system diseases. 3 More than 80 percent of working Americans don’t have disability income insurance or aren’t covered adequately. 4

Features of Disability Income Insurance:

When you are disabled (as defined in the policy) and cannot engage in your regular occupation (or an occupation for which you are reasonably qualified for – depending upon the type of policy you select), your policy will pay you an amount of money each month during your disability. The amount will be specified in the policy, payable up to a maximum predetermined length of time. There is a waiting period before benefits are payable. Your monthly benefit amount is determined by your income and occupation. You can choose the length of time during which the monthly benefit will be paid. You can select the waiting period – the number of days following a disability before benefits will be payable. Unlike group insurance paid by your employer, you pay no income tax on the benefits you receive from the policy. 5

When is a Good Time to Purchase Disability Income Insurance?

The best time to buy Disability Income insurance is when you’re young and healthy – before you develop a sickness or injury that may make you uninsurable later. Plus, your annual premium will be considerably less at a younger age. If you bought a policy at age 30, for example, your annual premium would be about half as much as it would be at age 45. And even though you would pay premiums for 15 years longer, the total cost to age 65 could be less than if you waited until age 45 to buy. ⁶ If you’d like more detailed information, contact your local Farm Bureau agent.

How Much Disability Insurance Do You Need?

Start by determining your monthly expenses. Consider such things as your mortgage or rent payments, insurance premiums, car payments, credit cards, loans, food, clothing, utilities, day care and healthcare expenses not covered by insurance. Then, consider how long your current resources -- such as employer-provided sick leave, state retirement system benefits, Workers' Compensation, Social Security and non-salary income from investments -- would last. Also, review any employer-sponsored disability benefits to determine any shortcomings/shortfalls.

For a more complete analysis of your current income needs versus the income you can expect to receive when disabled, contact a local Farm Bureau agent by using the  Agent Locator.

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1	Current Population Survey, U.S. Bureau of the Census, 2002
2	National Organization on Disability/Harris Survey of Americans with Disabilities, 2000
3	Chartbook on Work and Disability in the United States, 1998
4	National Underwriter Magazine, May 2001
5	Tax Facts 1, 1999, pp. 200 + 220
6	Does not take into account the time value of money