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Disability Insurance: Individual: Things To Think About When Purchasing

Benefit Amount

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What benefit amount should you purchase? Ideally, you should receive as much income on disability as you receive while working. At the least, aim for purchasing enough disability insurance to make up for the difference between income from other sources such as interest on savings, dividends, and other income and the amount of your expenses on disability.

How much you will be permitted to purchase depends on the amount of your income when you purchase the policy. Since an insurance company doesn't want to provide an incentive for you to become disabled, many companies limit benefits to a maximum of one half of the applicant's wages. The limit may vary if you are self-employed or if you are a professional such as a physician or CPA. The writing agent will help you arrive at how much benefit can be purchased.

CAUTION: It is not advisable to lie about your income to obtain a higher benefit than you are entitled to under the insurance company's rules. Should the company discover the error, it may be able to void the contract entirely and not pay you any benefit or impose a lower benefit.

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