If you become disabled you may not be able to work and therefore your income may be in jeopardy. Disability insurance provides income while you're disabled. A sobering fact is that 40% of the populations will have some type of disability by the time they're 65. Based on this data, it is imperative that you make have a plan if the unexpected occurs.

According to the Insurance Information Institute, "an individual disability income policy is the best way to ensure adequate income in the event of disability." A benefit of purchasing your own policy is that the benefits are not subject to tax. These private policies typically replace between 50% and 70% of income. You cannot obtain a policy that replaces 100% of lost income because the insurance companies want you to be motivated to get back to work.

Two Types of Disability Insurance

There are two main types of disability insurance: short term and long term. Short term disability insurance has a maximum life of two years while long term can last until the rest of your life.

Key Variables

The benefit period is the amount of time you receive monthly premium payments if you become disabled. Experts recommend you buy disability insurance that will last until your 65 because this is the age that Social Security Benefits kick in. Some policies are what is known as "own occupations" which means that they will pay if you are unable to perform work in your chosen field. Other policies only pay if you cannot work in any occupation. Another important factor to consider is the "waiting period".

Insurance Company Stability

Obviously you want to be sure that the company your purchase a policy from will be viable and able to pay benefits if you were to become disabled. Therefore, you need to examine the likelihood that your insurance company will be in business for the long haul. You can check up on the status of insurance companies by looking into their rating. Ratings are provided by companies who study the finances of insurance companies and assign ratings that indicate the current financial status of the insurance company.

Ratings Companies

The following companies provide ratings for insurance providers:

Fitch Ratings
1 State Street Plaza
New York, NY 10004
http://www.fitchibca.com

Moody's Investor Services
99 Church Street
New York, NY 10007
http://www.moodys.com

Standard & Poor's Insurance Ratings Services
55 Water Street
New York, NY 10004
http://www.standardandpoor.com