Changing Careers and Issues Regarding Insurance Including Disability and Social Security

Becoming disabled could be a financial catastrophe for anyone who is contemplating self-employment or pursuing advanced degrees or an extended vacation. Consider how disability insurance can help safeguard your income.

Things you should know about Disability Insurance:
There are special coverages available for self-employed people, partners, etc.
    Business Overhead Expense Insurance

    - This policy pays a benefit to cover the ongoing cost of running your business if you become disabled. Most policies cover business expenses like rent, utilities, payroll expenses, supplies etc., for a specific time period -- long enough to keep your offices open while you recover from your disability.

    Buyout Disability Insurance

    - When a partner or owner of a business is disabled for an extended period, itís often difficult for the business to continue to operate for a long period of time. Buyout disability insurance simplifies matters by paying out benefits to the other partners/owners/operators. These benefits are used to buy out the interest of their disabled partner, after the disabled partner has been disabled for a specified period, usually one or two years.

    Key Employee Disability Insurance

    - This protects you in the event one of your key employees becomes disabled, by paying a benefit to offset the financial loss to you because of his or her inability to work.

Donít drop your disability coverage because youíre taking a sabbatical from work. If you already own a disability policy and intend to return to work after taking time off to pursue a degree, for example, dropping your coverage may not be the best choice. You will probably need disability insurance after you go back to work -- and at that point, you may not be able to replace your current coverage with as broad a policy.
Thinking Social Security? You may want to think again...
Social Security doesnít provide adequate coverage, in most cases. Social Security does pay some disability benefits -- but qualifying for them is much harder than most people realize. Social Security typically pays disability benefits only if you are diagnosed with a fatal illness, or if your physical or mental disability makes you unable to do any kind of work for at least 12 months. Even then, you wonít receive any Social Security payments for the first six months after you become disabled. Thatís not much of a safety net. Youíd have a great deal more protection with your own disability insurance policy.
Your disability benefits could be tax-free
Usually, if you pay for disability insurance with after-tax dollars, any benefits you receive will be tax-free. Since taxes wonít be taken out of your disability insurance payments, you donít need to replace 100% of your gross income. (Thatís good, because insurers donít sell policies that replace 100% of your income; most disability coverage replaces only up to 60% - 70% of your gross income because insurance companies want you to be motivated to get well and return to work).



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COBRA -- COBRA, which is the Consolidated Omnibus Budget Reconciliation Act, guarantees that all individuals who are covered by medical insurance have the right to continue coverage for a monthly fee if employment or marital status changes. A nonemployee spouse in a terminated marriage is entitled to COBRA coverage at his or her own cost for up to thirty-six months.

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