Personal Income Protection
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The need for personal income protection has grown out of the fact that over 70% of all Americans live paycheck to paycheck, more than 25 million are underinsured, and most people have no savings at all. The idea of wealth is one that seems to change according to a person's current financial status and the physical environment they live in. For example; someone born and raised in a suburb in California, where the family has a nice two-story home with manicured gardens, pool, and newer car, would be considered wealthy by the vast majority of people world-wide. But, if that same family were being described by the elite of American society, they might be described as middle class. It's all a matter of perspective. Unless a person is at million dollar net worth status in the U.S., that person would probably not consider themselves wealthy. Sometimes when a person doesn't think there is much to lose, that individual might not protect it as well as if the person knew personal income protection may be needed. Now, with all of that being said, people do have assets. The assets owned may only consist of a house with a mortgage payment, a stamp collection, an automobile, and a couple of Certificates of Deposits worth $10,000. This is small change in terms of real wealth. However, it may be your only personal property. If someone were to come in and take any of those things away, it is likely to be a traumatic experience.
That's exactly what would happen in the case of a debilitating illness or injury. Thusly, there is a grave need for personal income protection. If a person is hurt on the job, there is typically coverage by worker's compensation or state disability. The employer provides this insurance to workers. Laws regarding workers' compensation were developed to make sure that employees are provided with a predetermined sum of money if they are injured or disabled as a result of something that happens on the job. A major purpose of this set of regulations is to eliminate lawsuits. The law states that the employee is to receive two thirds of his or her normal wages as long as the individual is disabled. Thusly, it covers medical bills and employee retraining. A disabled employee may receive additional sums for physical injuries that are permanent. In addition, there are benefits for dependents of workers who are killed on the job or develop work-related illnesses. Just think about it, if a person is disabled, they can receive approximately 60% of their salary.
Disability insurance covers the person when the illness or injury is not job related. If an individual pays for a disability plan after taxes, there are usually not any federal income taxes assessed on the benefit. Therefore, a disability insurance plan which provides personal income protection at the rate of 60% of a person's gross salary or wages actually replaces 85-90% of a person's spendable income. Most times, this amount of coverage will provide sufficient income to cover basic needs such as mortgage or rent payments, car payments maintenance, credit card and installment loan payments, insurance premiums, food, clothing, utilities, taxes, and school expenses. Because most people tend to live on nearly 100% of what they earn, there is still a loss of income gap of 10-15%. This gap can be filled using loss of income protection on specific accounts. This option is available when a person opens a credit account of any type. The individual is usually given an option of including disability or loss of income protection on that particular account. Coverage could be on a credit or charge card, a line of credit, a standard loan, or a mortgage. The beauty of this coverage is that a person's credit rating is protected because the monthly payment is still being paid. An individual could end up with their mortgage being paid and all of their credit accounts being paid. Personal income protection also takes a mental load off due to the fact that the financial burden is no longer a problem.
One does not have to be wealthy or even well-off in order to participate in a personal income protection plan. As a matter of fact, it should be relatively easy to find out how much coverage you would actually need to survive in case of crisis. First, take an inventory of all bills and monthly obligations. Now, multiply that amount by 6. The result is the amount of savings or personal income protection a person would need in order to maintain their current standard of living. If saving this amount of money is difficult, the other options are to use credit protection plans for each credit obligation. This will reduce the amount of a person's monthly outgo during the period of income loss. Then, set aside a certain amount of money per paycheck until you reach an amount that is equal to six months worth of non-credit obligations like; utilities, taxes, food, clothing, insurance premiums, and other out-of-pocket expenses.
No one knows when or what will come in a day. "If we confess our sins, he is faithful and just to forgive us our sins, and to cleanse us from all unrighteousness." (I John 1:9) But, when it comes to personal income protection, it's better to be safe than sorry. One should check with human resources at the job to find out exactly how coverage works at your job. Then, go about putting your financial house in order; just in case. There's an old adage that says "if a person fails to plan, they plan to fail." Knowing that 70% of people live paycheck to paycheck, there is a high probability that the person reading this article could be in that group. Take stock of the benefits available and make sure they are the ready in time of need.
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