WHO ABSOLUTELY NEEDS IT?
"Anyone who has to support another and or has their own bills and does not have another independent source of income needs disability insurance," says disability attorney Troy Rosasco of the New York firm Turley, Redmond & Rosasco.
HOW DO YOU BUY IT?
Experts say businesses with 50 or more workers tend to sponsor a plan that's either 100% or partly paid for by the employer. Popular group insurance carriers include Unum, Cigna, Metlife and Prudential. Check with their human resources department for more.
Others can buy directly from private insurance carriers. The Gaurdian, Mass Mutual and Northwestern Mutual offer various, personalized plans.
HOW MUCH DOES IT COST?
That depends largely on the type of disability insurance. A 2004 III survey found the average annual premium for a group plan to be roughly $218/year. That's less than $20 per month. "Typically a rule of thumb is a half a percent of payroll," says George Faulkner, principal at Mercer Health and Benefits. So, if one earns $50,000 a year, the insurance premium would be around $250 a year. For individual plans, the cost is significantly higher and is based on a person's age, health and lifestyle.
WHAT'S THE PAYOUT?
Generally, group policies pay up to 60-67% of your annual base income, not including bonuses. There may be a monthly cap, as well. Furthermore, if the employee pays the entire premium, the payout is not taxed. If the employer helps to pay for the plan, the payout is taxed. Individual plans which are more popular with high net-worth individuals, tend to have no caps on the payout. So, someone earning $100,000 base salary with a $400,000 annual bonus is better off getting an individual disability insurance plan, says Rosasco, since it may take into account the person's total earnings and better compensate them in case of an emergency.
