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When asked what is their most valuable asset, people typically will answer that it is their home or their retirement savings. But the truth is that your most valuable asset is your ability to earn an income.

And – the biggest threat to that asset is becoming seriously ill or disabled and therefore being unable to earn a living. Protecting your most most important asset, income earning potential, is paramount.

As a medical professional, it is likely that you face the health issues of others on a regular basis. Yet, it is important to also realistically consider how you would protect your current lifestyle – or even simply be able to pay for everyday expenses – without receiving a regular paycheck.

The chances of becoming disabled at some point during your working career are actually higher than you may think. In fact, according to the Social Security Administration, even a currently healthy and young 20-year-old worker has approximately a 3 in 10 chance of becoming disabled before reaching retirement age.

 

The Income Protection Solution

Disability insurance can help you to protect your ability to earn a living. When you aren’t able to work due to a triggering illness or injury, the income received from these policies can help you and your family to keep a roof over your head maintain your ongoing expenses, and rest easier knowing that your bills will continue to be paid.

These types of insurance policies provide a monthly amount – typically a certain percentage of your actual wages – on a regular basis, once a certain period of time has elapsed. This means that, similar to a dollar amount deductible on other types of insurance, the holder of a disability insurance plan must satisfy what is referred to as an elimination period prior to benefits from the policy being paid out. Elimination periods can be as long as a year or as short as 0 days – and the longer the elimination period that is chosen, the lower the policy premium will be.

Once your benefits begin, they will be paid to you over a set period of time. This time period is a predetermined number of months or years that is chosen on the initial policy application. In most cases, applicants can choose to receive benefits for a certain number of years or until they reach age 65 or age 67 – as long as their disability continues. As with the elimination period, the length of time that is chosen will affect the policy premium in that the longer benefit periods will constitute a higher amount of premium.

 

Taxes and Disability Income

Your disability income benefits could be taxed, depending on what type of policy you own. For example, if you purchase an individual policy for yourself and you pay your premiums with after-tax dollars, then the benefits that you receive are typically tax-free.

However, if you purchase a plan through your business or practice and the policy premiums are paid with pre-tax dollars, then the income that you receive from the policy will be taxable as ordinary income.

In any case, it is important to know that your income and your lifestyle can be protected – regardless of your future health situation. Disability income can help you in maintaining that lifestyle as well as from dipping into savings or other assets should a need for income arise.

 

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