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A disability policy is designed to replace lost income
when a policyholder is unable to work due to a covered accident or
illness.
Disability policies generally have:
- A waiting period - A waiting period in disability
insurance is like a deductible on your car insurance. The difference
is that while a deductible for auto insurance is expressed in dollars
($250, $500, ect.), a waiting period for disability insurance is expressed
in time, such as 60 days, 90 days, or longer. It is the amount of
time that you must wait before benefits will be paid. The longer the
time period, the lower the premium.
- A benefit period - A benefit period can be two
years, five years, ect. The most comprehensive policy is one that
pays benefits to Age 65.
- An occupational classification - Depending on the
occupational classification, the premium and the benefit period will
be determined.
- A monthly benefit amount - A monthly benefit amount
can be up to 60% of the present income. Benefits are tax free on an
individual policy. The older you are, the more disability insurance
will cost, but once a premium has been established, it is likely to
stay the same throughout the life of the policy.
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