How to Protect Your Income Against Disability


For most working Americans under about 50, their most valuable asset isn’t a house or a retirement plan. It’s the ability to continue working and earning a living. In fact, the younger you are, the more critical it is to protect this vital engine of wealth.

That’s what disability insurance is for.

In a nutshell, disability insurance replaces your income in the event you should become sick or injured and unable to earn a living.

Many Americans get disability insurance as an employee benefit. The employer pays the premiums, and deducts the premiums against earnings as an employee benefit expense. Other Americans get disability insurance on their own, by going through an agent.

Disability policies are generally designed to replace about 60 percent of a workers’ income. The idea: To give the worker enough of a cushion to keep paying the mortgage or rent and basic living expenses, while still giving the worker an incentive to recover quickly and get back on the job.

Benefits kick in after an ‘exclusion’ period, which can be anywhere from two weeks to a year. Some employers offer both short-term and long-term disability insurance plans, to ensure that workers and their families are not devastated even by the exclusion period. However, the longer the exclusionary period, the lower the premiums, all else being equal.

Definitions Matter

With life insurance, it’s usually not hard to determine whether a benefit is payable: Either there is a death certificate or there isn’t one. True missing persons cases are rare. Disability insurance policies, however, must operate in shades of gray, and judgment calls are routine. The precise language of the contract itself – and particularly the contractual definition of disability and when benefits will be payable – is paramount.

Own Occupation vs. Any Occupation

An own occupation policy pays a benefit if the disability prevents the insured from returning to work in his or her own occupation previous to the onset of the illness or injury that caused the disability. If a surgeon can’t be a surgeon anymore, the policy is generally payable. An any occupation policy, on the other hand, pays a benefit only if the insured cannot work in any occupation to which the individual is suited by virtue of education and experience. If the surgeon cannot continue to work as a surgeon, for example, but can make a perfectly good college professor or medical school teacher, then the policy would not pay a benefit.

Own occupation policies are more expensive, though, than any occupation policies, all things being equal. However, it is common for a policy to have a hybrid definition – beginning as an “own occ” policy, as it is referred to in the industry, and switching to any occ after a couple of years. Most insurance professionals recommend an own occupation policy to those who can afford it, though those with employer-paid plans may not have a choice in the matter.

Taxation of Disability Insurance

The way disability insurance is taxed depends mostly on who paid the premiums.

Premiums are not tax deductible to an individual. But if the individual paid the premiums, then disability insurance cash benefits are not generally taxable.

If the premiums were paid by the employer, however, benefits are taxable as income to the recipient.

Available Riders

Depending on your age, budget and overall situation, you might want to consider one or more of the following available riders, or endorsements. These are optional features, generally available for additional premium.

Cost of Living Benefit. This optional rider pegs benefits to the inflation rate. So your final benefits will increase as the cost of living increases.

Future increase benefits. Guarantees the right to buy additional disability insurance in the future, even if you are deemed uninsurable at that time. The new coverage you buy when you exercise your option under this rider is priced at your age at the time of purchase. For example, you may get the right to buy additional coverage upon getting married, having a child, or achieving specific ages. The contract will usually limit your future increase guarantee to half of the original coverage.

Waiver of Premium. If you do become disabled, the waiver of premium rider allows you to skip paying premiums on the policy. This is important, because if you do go on claim for a total disability, your income is already reduced by about 60 percent, in most cases. Continuing to pay a disability premium is going to be that much tougher if you have to keep it going while on claim, and while you may have additional medical expenses out of pocket at the same time.

Lifetime Extension. This rider guarantees that benefits will continue beyond age 65. Many policies cease paying benefits when the recipient is eligible for Social Security. With the lifetime extension rider, benefits for disabilities incurred before a certain age will remain payable beyond that point.

Automatic Benefits Increase. With this rider, the income benefits will increase automatically with any pay raises, regardless of the insured’s medical condition at the time of the promotion or pay raise.

Accidental Death and Dismemberment. This option pays a specified cash benefit if you lose one or more limbs, or if you lose your eyesight. It may also pay an additional cash benefit if you are killed in an accident, rather than by illness.

Return of Premium. This rider returns any premiums you don’t use back to you when you reach a specific age – typically age 65. If you use some benefits, the insurance company will deduct the benefits paid to you while disabled from the premium refund.

If you have questions about how to use insurance to help you protect you from the financial catastrophe a disability would cause, please contact us at 203-259-7580 or visit our website. 

Passenger Car Drivers More Likely to Die in Crashes With SUVs Regardless of Safety Ratings

Most consumers who are shopping for a new car depend on good crash safety ratings as an indicator of how well the car will perform in a crash. But a new University at Buffalo study of crashes involving cars and sport utility vehicles (SUVs) has found those crash ratings are a lot less relevant than vehicle type.

The study is being presented May 16 at the annual meeting of the Society of Academic Emergency Medicine in Atlanta.

In head-on collisions between passenger cars and SUVs, the UB researchers found that drivers in passenger cars were nearly 10 times more likely to die if the SUV involved had a better crash rating. Drivers of passenger cars were more than four times more likely to die even if the passenger car had a better crash rating than the SUV.

“When two vehicles are involved in a crash, the overwhelming majority of fatalities occur in the smaller and lighter of the two vehicles,” says Dietrich Jehle, MD, UB professor of emergency medicine at Erie County Medical Center and first author.

“But even when the two vehicles are of similar weights, outcomes are still better in the SUVs,” he says, “because in frontal crashes, SUVs tend to ride over shorter passenger vehicles, due to bumper mismatch, crushing the occupant of the passenger car.”

When crash ratings were not considered, the odds of death for drivers in passenger cars were more than seven times higher than SUV drivers in all head-on crashes. In crashes involving two passenger cars, a lower car safety rating was associated with a 1.28 times higher risk of death for the driver and a driver was 1.22 times more likely to die in a head-on crash for each point lower in the crash rating.

The UB researchers conducted the retrospective study on severe head-on motor vehicle crashes in the Fatality Analysis Reporting System (FARS) database between 1995 and 2010. The database includes all motor vehicle crashes that resulted in a death within 30 days and includes 83,521 vehicles involved in head-on crashes.

“Along with price and fuel efficiency, car safety ratings are one of the things that consumers rely on when shopping for an automobile,” says Jehle. These ratings, from one to five stars, are based on data from frontal, side barrier and side pole crashes that compare vehicles of similar type, size and weight. The one to five star safety rating system was created in 1978 by the National Highway Traffic Safety Administration.

Jehle notes that after manufacturers addressed the roll-over problem with SUVs that plagued these vehicles in the 1980s and 1990s, rollover crashes are now much less common in SUVs.

“Currently, the larger SUVs are some of the safest cars on the roadways with fewer rollovers and outstanding outcomes in frontal crashes with passenger vehicles,” he says.

Jehle says that prior studies on frontal crashes have found that compared to passenger cars with a 5-star crash rating, cars with a rating from one to four stars have a 7-36% increase in driver death rates.

“Passenger vehicles with excellent safety ratings may provide a false degree of confidence to the buyer regarding the relative safety of these vehicles as demonstrated by our findings,” says Jehle. “Consumers should take into consideration the increased safety of SUVs in head-on crashes with passenger vehicles when purchasing a car.”

Co-authors with Jehle, all from UB, are: Albert Arslan and Chirag Doshi, MD candidates in the School of Medicine and Biomedical Sciences; Joseph Consiglio, data manager/statistician for the UB Department of Emergency Medicine and a graduate student in the Department of Biostatistics in the School of Public Health and Health Professions; Juliana Wilson DO, a post-doctoral scholar in the Department of Emergency Medicine and Christine DeSanno DO, a resident in the UB Department of Emergency Medicine.

 Source: University of Buffalo, Shared via Claims Journal, by Denise Johnson

5 Myths About Home Fire Sprinklers

The Insurance Institute for Business & Home Safety (IBHS) is helping to dispel five common myths about fire sprinklers, and highlighting the benefits of home sprinklers to kickoff Fire Safety and Awareness Week (May 6-12), which is part of National Building Safety Month in May.


1. When one sprinkler goes off, all the sprinklers activate.

The sprinkler heads react to temperatures in each room individually, allowing only the sprinkler closest to the fire to activate. In fact, 90 percent of fires are contained by the operation of just one sprinkler.

2. A sprinkler could accidentally go off, causing severe water damage to a home.

Records show that the likelihood of this occurring is very remote. In addition, residential fire sprinklers are designed and tested to minimize such accidents.

3. Water damage from a sprinkler system will be more extensive than fire damage.

The sprinkler system will limit a fire’s growth. Therefore, damage from a residential sprinkler system will be much less severe than the smoke and fire damage if the fire had continued unabated, or the water damage caused by firefighting hose lines.

4. Home sprinkler systems are expensive.

The cost of installing home fire sprinklers averages $1.61 per square foot for new construction, according to the Home Fire Sprinkler Cost Assessment report produced by the Fire Protection Research Foundation. To put the cost of a sprinkler system into perspective, that is roughly the same amount people pay for carpet upgrades, a paver stone driveway or a whirlpool bath – none of which save lives.

5. Requiring residential fire sprinklers will inhibit new home construction.

A 2009 study conducted on behalf of the National Fire Protection Association (NFPA) compared residential home construction in four counties in Maryland and Virginia – two with sprinkler mandates and two without. The study concluded the presence of sprinkler mandates did not have a negative effect on the number of homes being built.

Benefits of Fire Sprinklers

A residential fire occurs every 87 seconds, according to the U.S. Fire Administration (USFA), with half of all home fire deaths occurring between 11:00 p.m. and 7:00 a.m., according to the NFPA.

Residential fire sprinklers can contain a fire and may even extinguish it before firefighters arrive, according to the Home Fire Sprinkler Coalition. This provides valuable extra time to get everyone out of the house. Sprinklers reduce civilian fire deaths by an estimated 83 percent; reduce direct property damage by more than two-thirds per fire; and are responsible for an estimated 65 percent reduction in firefighter injuries, according to the NFPA.

The District of Columbia adopted a fire sprinkler installation building code requirement for all residences built after Jan.1, 2011. The result – fire deaths declined in the District from 33.4 in 2009 to 8 in 2011 and 2012 combined. In Maryland, State Fire Marshal Steven Barnard cited the state’s fire sprinkler requirement in newly built, multi-family dwellings as a significant factor in the 22 percent drop in fire-related deaths in the state in 2012.

“There is no disputing the fact that residential fire sprinklers can save lives and prevent significant property damage,” said Julie Rochman, IBHS president and CEO. “To that end, IBHS urges state lawmakers to protect the lives, safety and welfare of their constituents by adopting a residential fire sprinklers requirement for all new homes in their state building code.”

Source: IBHS at