When most people talk about having “enough” insurance, they’re usually referring to life insurance. But if your family relies on your paycheck to make ends meet, your loved ones could find themselves in a worse financial situation if you become disabled than if you were to die.
Because a disability that keeps you from working can generally bring even greater financial pressures in the form of extra bills to pay for your care. Yet if you cannot work, where will your family find the money to pay those additional bills on top of regular household expenses?
That’s why many financial experts refer to disability coverage as a “forgotten” safety net. While many Americans help protect their family’s financial future with life insurance, only a small fraction of today’s workers have set up a similar level of protection for their income—their most valuable asset.
If you need your income to pay the bills at the end of the month, chances are you may also need disability insurance. Here are just a few common situations:
Scenarios like the ones above are just a few of the reasons Graham Fuller, AMBA, Principal, Senior Relationship Manager of the IEEE Member Group Insurance Program, urges all technology professionals to give strong consideration to adding disability coverage to their financial portfolio.
“We all insure our homes and our cars. But when it comes to our biggest asset … our ability to earn an income … too many of us have simply overlooked a significant risk,” says Fuller. “It’s important to consider having a strong disability plan in place to help your family make ends meet if an accident or illness keeps you from working and earning a paycheck.”
Perhaps you haven’t thought much about disability coverage because you have disability insurance through work. Now may be the time to reconsider that decision.
Fuller points to three important reasons to consider adding an additional disability plan to your financial portfolio … even if you already have coverage through work:
Another potential pitfall for employer-provided disability benefits is taxes. In a nutshell: Current tax laws say that if your employer pays the premiums for your disability insurance, then you owe taxes on any benefits received. If, on the other hand, you pay the premiums for your disability insurance then any disability benefits are tax-free.
† The IEEE Sponsored Group Disability Income Insurance Plan is designed to cover disabilities that prevent you from performing your occupation, provided you are not otherwise working for pay or profit.
Here’s an example to show you how this works:
Let’s say Jason Curtis makes $100,000 a year. His disability coverage pays up to 60% of his salary or $60,000 a year. So his monthly benefit would be $5,000.
If Jason paid his own premiums for his disability as an individual policy, Jason would receive the full $5,000 benefit amount if an accident or injury left him disabled and unable to earn an income.
But what if Jason’s employer paid the premiums instead? Jason would owe taxes on his benefits. That means instead of a $5,000 monthly benefit, Jason would only receive $3,600 because 28% of his disability benefit would go to the IRS in the form of taxes.
“It’s critical to plan for the impact taxes may have on your disability benefits,” adds Fuller. “If paying your own premiums is not an option in your company’s disability plan, you should give strong consideration to association group insurance instead.”
“A disability that keeps you from working is bad enough. But being forced to pay taxes on your disability benefits simply adds insult to injury,” says Fuller.
IEEE sponsors a Group Disability Income Insurance Plan to members interested in adding disability coverage to their financial portfolio. This portable benefit option gives you the advantage of solid coverage protection that can follow you throughout your career.
In addition, monthly benefit amounts up to $7,540 with a wide range of benefit waiting periods give you the flexibility to tailor your level of protection to your family’s unique financial needs.
*Features, costs, eligibility, renewability, limitations and exclusions
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