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were made by the employer and not included as part of the employee’s gross income. Thus, if you receive $627 per month in disability benefits from your employer’s DI plan and you didn’t contribute any money toward the cost of the insurance, that $627 would be considered your gross income and you would be liable for taxes on it.

An employee’s coverage may be terminated, also. This would occur when the employee quits or retires. The employer may also decide to terminate the coverage, which would result in all covered employees no longer having the insurance. Or, if the employer fails to pay the premium (unless there is an error), the coverage will be canceled. If the employee quits, he or she doesn’t have this option to extend the benefits, or roll them over into an individual plan. That person will then have to wait to fulfill his or her new employer’s elimination period before having coverage again.

Because employer-sponsored DI coverage is designed for work- related accidents, it shouldn’t be taken into account when consider- ing financial planning. Relying on this type of DI to cover you is like planning to die in a car accident. You don’t know that you will become disabled on the job, just like you don’t know how you will die. Should you become disabled at work, this insurance will help cover your expenses, but, if you aren’t hurt at work, then it will be of little use to you.

Individual DI Plans The best way to make sure that you are covered in the case of a dis- ability or debilitating illness is to purchase your own DI insurance. Although there is a growing importance placed upon group forms of coverage, there are also a number of reasons why an individual would need his or her own coverage. First, the amount of coverage provided by the group plan is insufficient. Second, the duration of benefits may not be long enough. Plus, many people simply do not want to rely on a group plan, especially if the benefits will wind up being taxable to them. Benefits paid under an individual plan would normally be tax-free.

Just like with other forms of DI, there are elimination periods with individual plans. But because you are paying for your own cov- erage, you may be able to choose the length of your elimination

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