Disability insurance is a great way to protect yourself from financial crisis during such times! But are the proceeds taxable? Find out your answers below!
Disability insurance is a great way to protect yourself against losing your financial comfort when faced with a disability. The proceeds can help you keep yourself afloat especially if you are the only bread winner in your family.
Disability insurance can be bought in many ways. Some companies provide it to their employees in their contract. You can also get disability insurance separately from insurance providers. This may even get you better rates!
There are actually two different sections of working people, the employed and the self-employed. Disability insurance is taxable or not depending on a few factors.
For the employed:
Disability insurance is tax deductible under the following conditions if you are employed normally.
- If you have paid for the plan
- If your payments are cut from your salary
The proceeds from disability insurance need to be facilitated via payments indirectly or directly from the employee’s salary. If the employer has in any way paid for the insurance, then the proceeds become taxable.
It is considered best for the employed to pay their own premiums or get a disability insurance separately to enjoy the proceeds without having to worry about the taxes!
For the self-employed:
Self-employed is the sector of people who own a business. They are not paid like salaried people and depend on the income of the business.
The self-employed enjoy the benefit of having tax deductible disability insurance proceeds. This is because they pay their own premiums.
Why is it necessary to get disability insurance?
Disability insurance protects you and your loved ones when you are affected by a disability which renders you incapable of working. It gives you peace of mind that your family’s finances are secure. This also ensures the healing process is without the tension of finances!