Personal Finance 1st Edition by Jack R. Kapoor

Exercise 10

When considering disability income insurance, what are the trade – offs of purchasing this type of insurance and how does this affect the Lawrences?

Step 1 of 3

Disability income insurance –

The disability income insurance provides a regular cash income lost by an employee because of an accident or any illness. It is the most negligent form of insurance policy. Generally, disability causes more financial losses than death to an individual and his/her family. Huge expenditure will be incurred to treat the patient after disability and the family living expenditure and other expenditure will continue to incur. Disability insurance will provide a regular income to the individual and family in order to run their life without any financial problem.

The amount of disability income can be determined by working out in detail as per the disability income worksheet exhibit 11-6. If in case the sum total of all the disability benefits meet up an individual’s after-tax income, then the individual can be safe and can be sure of leading the life without any financial problem. Similarly, a person should know the waiting period after which the benefit will be received and how much will be received. After detailed analysis an appropriate amount of insurance has to be chosen after making a detailed analysis and comparison.