Disability Insurance

What is it?

Disability insurance pays benefits when you are unable to earn a living because you are sick or injured.

When is it used?

When you can’t work, disability insurance will pay you a portion of your pre-disability income.

Our recommendation:

Our advice is to purchase disability insurance. There are two common ways to buy this type of income protection: through your employer or an individual policy. If your employer offers this we suggest signing up for the maximum amount you qualify for. Most plans offer benefits that pay up to 60 percent of your gross income up to a dollar maximum. If your employer does not, then you will need to obtain an individual policy. These can be tailored to your situation with the help of the agent you use to buy the policy.

Rational:

Protecting your income is important: consider what you would do if you could not work to support yourself. Or, if you have dependants, consider what they would do if you could no longer provide for them. This argument alone makes it an important insurance to have but consider that the likelihood of suffering a disability by age 50 is 25%. This is far greater than the chances of dying prematurely or needing Long Term Care.

Where to find it:

Many employers allow you to defer some of your monthly salary to pay for this benefit on a pre-tax basis. Through group (employer sponsored) plans it is also usually very affordable. If you work for a company that does not offer disability or are self employed you can obtain coverage on an individual basis.

Click here for an indepth article about Disability Insurance.