Paid Life Insurance

Disability Insurance 15 – Disability Benefits of Life Insurance Policies

There are two main methods of providing disability income policies Life Insurance are: waiver of premium and combination policies.

1. Waiver of Premium

Many insurance policies offer a waiver of life "bonus" provision in the event the policy owner becomes disabled during the term of the policy. The premium paid for separately for this additional coverage or rider. For tax purposes, the adjusted cost basis of the policy does not include any additional premium payable for this benefit. The payment of such Profit is not a disposition for tax purposes because it is paying an amount equal to the premium to maintain the current policy.

2. Policy mix

A policy that is considered exempt allows cash values in the plan accumulate on a tax-deferred basis. Recently, some insurers have designed policies that allow addition of disability benefits under a Life Insurance Policy exempt.

These policies provide (i) the protection Of Life Insurance and (ii) the disability income benefits. For example, a type of policy allows cash value policy insurance to finance all or part of the disability premium. The cash value can also be used to finance the disability benefits. Therefore, the elimination period of disability benefits can be extended, which has the effect of reducing the costs of the disability plan.

There are several advantages and disadvantages of this product mix:

Advantages of the policy mix

a) The packaging of insurance benefits in a product may simplify the process for the prospective buyer.

b) The completion of the application and underwriting requirements for combined policies may be faster as duplicate questions and medical tests can be avoided.

c) The policy holder can benefit from reduced charges under a policy of raw policy.The combined the benefits of disability insurance are often after-tax expense.

However, Cash Value Life Insurance Policy are grow on a tax-deferred, to be used to finance the charges under a combined program. The policyholder therefore, the benefits due to their ability to use tax-deferred investment income under the policy free life insurance to cover part or all of the premiums for disability.

d) The combination of disability insurance and life insurance creates flexibility for premium payments. In general "disability products only" require payment of a premium Annual fixed.

By including disability coverage within an exempt insurance policy, it is possible to build a cash reserve that can be used to finance future morbidity and disability costs.

2. Disadvantage

a) It can be very difficult for a company that offers the best products, both life and disability insurance product lines. An insured may have to forego some of the important features of the product when it is a combination product.

b) A combination of products that may not be as flexible as their own policies when the policy is in force. An insured independent living and disability policies may make changes to a policy, such as the surrender of the policy, without affecting benefits under other policy. This may not be the case of a combination product.

c) As they are relatively new to the market, the tax treatment of such plans is still evolving. Department of Finance will disagree with the position of the insurer that the cash value of an insurance policy can be paid tax-free if they are disabled. The calculation of the adjusted cost basis of the insurance policy to be affected by the taxation department interpretation of the rules and the combination of benefits under an insurance policy might affect its exempt status.

I hope this information can help. For more information, please visit my home page at:

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About the Author

I have been studying natural remedies for disease prevention for over 20 years and working as a financial consultant since 1990

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