Your most valuable asset is your ability to earn an income. Should you or your spouse experience a serious illness or injury, how would the loss of income affect you? Combine the loss of income with increased expenses due to necessary medical care, and the financial stress of a disability can become just as taxing as the disability itself.

While your employer may cover you with some form of company-paid disability insurance, often coverage is only partial and/or short term. Purchasing a Personal Disability Income Insurance policy can help you cover any financial gaps that you may have—with the added bonus that these benefits are paid to you tax-free.

Because the benefit period of short-term policies lasts a maximum of two years and long-term policies have a typically extensive waiting period, it is wise to acquire both long-term and short-term disability insurance policies. Having both policies will assure that you are covered from the unfortunate moment you fall ill or become injured through the entire period of disability, or even the rest of your life.

Policy considerations

•      Definition of disability: Some policies pay benefits if you are unable to perform the duties of your regular occupation, while others pay only if you cannot engage in gainful employment at all. Some policies also pay benefits if you become ill or injured and are unable to earn a specified percentage of your income.
•      Amount of income: This amount varies by policy, but a policy that pays 50 to 60 percent of your monthly salary (not including bonuses or commission) is the most common and most affordable option.
•      Length of benefit period: You can choose to receive benefits that are payable from one year, two years, five years or to retirement age. Opting for coverage that lasts through age 65 affords the best protection against an injury or illness that permanently removes you from the workforce.
•      Residual benefits: Selecting this feature will give you partial payment in the event of an income reduction due to being unable to fulfill all of your job responsibilities.
•   Cost of living increases (COLA): Adding optional COLA to your disability policy means that the coverage you purchase today will keep up with the pace of inflation during the lifetime of the policy.
•      Short-term disability policies have a waiting period of up to 14 days with a maximum benefit period of no longer than two years.
•      Long-term disability policies have a waiting period of several weeks to several months with a maximum benefit period from a few years to the rest of your life.

Securities and investment advisory services are offered solely through Ameritas Investment Corp. (AIC). Member FINRA/SIPC. AIC and The Summit Group of Virginia LLP are not affiliated. Additional products and services may be available through Summit Group of Virginia LLP that are not offered through AIC. Representatives of AIC do not provide tax or legal advice. Please consult your tax advisor or attorney regarding your situation.