When people think about their assets, they generally point in the direction of their homes, cars and retirement accounts. However, your true asset is the ability to make an income. Without it, you won’t be able to pay for your home or car or put money into your savings accounts.
According to a survey by MagnifyMoney, 53 percent of Americans live paycheck to paycheck. Just one missed paycheck can cause the bills to pile up. How long could you go without a paycheck? If you’re like the majority of Americans, you couldn’t go any more than three months.
Fortunately, you do have options when it comes to protecting your income. Disability income (DI) insurance in NJ provides supplemental income if you can’t work due to an illness or injury. You can get this insurance from your employer or from a private insurer.
What is Disability Income Insurance? How Does it Work?
Disability income insurance provides extra income if you can’t work because of an accident or illness. Benefits are paid out so that you can maintain a comparable standard of living and cover your expenses. On average, disability insurance replaces 45-65 percent of your gross income on a tax-free basis.
There are two main types of disability insurance:
- Short-term disability insurance. Short-term disability insurance in NJ typically replaces 60-70 percent of your base salary and pays out for a few months to a year, depending on your policy.
- Long-term disability insurance. This insurance replaces 40-60 percent of your base salary, with benefits ending when the disability ends. This money is tax free! If the disability continues, the policy will end after a certain number of years or at retirement age.
Each insurance policy is different, so be sure to ask your financial advisor in NJ questions. For example, what are the base salary caps? Does the policy cover additional services like training to return to your job? What is the waiting period before benefits are paid? How does the policy define “disabled?”
Who Needs Disability Income Insurance? What are the Benefits?
If you rely on a paycheck to get by, you can benefit from NJ disability insurance. Even if you are young, disability insurance is still important. According to the Social Security Administration, 1 in 4 20-year-olds will experience a disability for 90+ days before they reach age 67. Some of the most disabilities include back injuries, heart attacks, cancer and diabetes.
The benefits to having disability insurance are:
- Maintain your standard of living if you can’t work
- Reduce financial strain on your family
- Keep current on your bills
- Preserve the money in your savings accounts
- Comfortably take time off to receive treatment
If you are interested in taking out long- or short-term disability insurance in NJ, contact Leonard Financial Solutions today. We’ll explain your options and what policies are best for your circumstances.
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