Jaylen and Avery have asked you to evaluate their current disability insurance coverage. 

What are the cash flow implications if Jaylen were to experience a serious disabling incident before retirement?

What are the cash flow implications if Avery were to experience a serious disabling incident before retirement?

What are the tax consequences of receiving disability benefits for Jaylen?

What are the tax consequences of receiving disability benefits for Avery?

Jaylen has a private disability income insurance policy with an own-occupation definition of disability and a 30-day elimination period. Based on the policy’s provisions, in the event Jaylen is totally disabled, a monthly benefit of $2,700 will be paid until normal retirement age, defined as the full retirement age under the Social Security Act on the date of disability. The annual premium is $761 and is fully paid by Jaylen. Avery has a disability policy through work. The policy pays 50% of salary($40,000) for 6 months with an own-occupation definition of disability. The waiting period is 5 working days. Premiums for Avery’s policy are paid by Davis Manufacturing as an employee benefit.