Today's workforce provides a wide and sizable need for disability income insurance. Those who might benefit from this protection include:

• two-income families, with or without children;


• employed single people;


• self-employed individuals and other small businessowners; and


• professional men and women.

As a rule, disability income insurance is designed for people with annual incomes of $15,000 or more. Generally, the higher the income bracket, the greater the need to protect the insured's standard of living due to the proportionately low benefit provided by social programs such as Social Security, Worker's Compensation, or State Cash Sickness benefits. For example, a 40-year-old wage earner with a spouse, two children, and an income of $75,000 could receive from Social Security, if he or she qualifies, only 42 percent of income. However, that same person with a lower income will receive approximately, if he or she qualifies, 61 percent of income — a substantial difference.

It is interesting to note that many highly compensated executives who have group disability income insurance as an employee benefit may in fact be underinsured because:

• the income replacement percentage is too little (i.e. less than 50 percent); or


• the maximum cap on benefits is too low (i.e. $3,000-$5,000 per month); or


• forced pre-age-65 pension distributions may reduce group LTD benefit levels. Using pension funds now leaves less pension money available for normal retirement needs.

These facts mean that highly-paid executives very likely should consider personal disability income policies to supplement their group plans.

Single, employed individuals very often have a particularly acute need for disability insurance. In many instances, a single individual may have no other way to care for himself or herself in case of a disability, other than by receiving disability income benefits. Single prospects who are not interested in buying life insurance to benefit someone else may well have a vital interest in protecting their own standard of living while alive, but disabled.

In many small businesses, a disabled owner can mean a disabled business — the business loses a key member of the operation. Not only will that key member have difficulty continuing to draw a salary while unable to make a contribution, but also the business could be placed in adverse financial straits.

In addition, tax penalties for both the business and the owner may be incurred. (For more information on tax penalties, see "Do You Want to Pay Income Tax Twice?" [Form 8812] Rev. 5/08.) While the business operation is in a state of flux or decay because of disability, monthly overhead and capital expenses will likely continue unabated. Disability and the loss of income and performance that result from it can devastate a business as seriously as it can devastate a family.

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