Disability

Some select quotes from an article on investmentnews.com, dated June 25, 2007:

Among the misperceptions about disability insurance is that the coverage is not essential, because workers’ compensation and Social Security will pay disability-related lost wages. The truth is, only about 10% of disabilities are job-related and therefore covered by work comp. Also, Social Security benefits often pay only 20% to 30% of a salary, compared with the 70% or more that usually is required to maintain the client’s lifestyle. Only about 40% of Social Security applicants qualify for benefits, because the application process is so arduous. The “disability test” of Social Security is the “inability to perform any work for wage or profit” — compared with private disability insurance plans — which often pay if the clients can’t perform their own job

Another disability myth is that individual coverage is not needed if clients have group coverage through their employment. Group coverage generally replaces only 60% of a salary, and since the benefits not paid for by the client are taxable, they, in fact, can walk away with less then half their prior earnings.

there is a way to continue 401(k) contributions — up to $45,000 a year — when they’re disabled. They can do that by paying the money into a trust. Although the buildup of assets in the trust is taxable, there is no requirement to start taking distributions at age 70½.

Many clients who own small businesses are unaware they can use disability insurance to buy out a partner who no longer can work due to an injury or illness, he said. The policy pays the fair market value of the disabled partner’s interest in the business to the healthy partners.

Group insurance rates — which don’t differentiate between the sexes — are especially attractive to women, because they become disabled more frequently than men.

from other articles:

becoming disabled did happen to more than 800,000 people in 2006.

according to the Insurance Information Institute (III), at age 35, people have a 45 percent chance of being disabled for 90 days or longer before their 65th birthday. And among those people, there's a 70 percent chance of being disabled for another two years.

Clients who think that they are covered adequately because they have disability insurance through work are mistaken. The 60% of income paid by many group policies often is inadequate to maintain the client’s lifestyle. That’s especially true of employees who are used to getting hefty bonuses.

Also, many employers’ standard operating procedure is to fire employees who go out on disability, and no law stops them from doing that.

After losing their jobs, disabled employees have even more household expenses, because they have to pay Consolidated Omnibus Budget Reconciliation Act premiums to maintain health coverage. After that coverage expires — in 18 to 36 months — they have to buy individual health insurance. That can run $1,500 or more a month.

can buy directly from private insurance carriers. The Gaurdian, Mass Mutual and Northwestern Mutual offer various, personalized plans.

How much will it cost?
That depends largely on the type of disability insurance. If it is a group plan, the III's survey in 2004 found the average annual premium to be roughly $218 per year.
"Typically a rule of thumb is a half a percent of payroll"

For individual plans, the cost is significantly higher and is based on a person's age, health and lifestyle.