For the sake of your family, long-term disability coverage is a must.

Insurance should not only be in the event of a death, as disability can be just as devastating.

What would happen if you or your partner suddenly became disabled and couldn’t continue with your regular employment? How would you pay the bills without your paycheck?   The lack of comprehensive disability insurance may be the biggest gap in a family’s financial planning program.

Person in wheelchair

Why Disability Insurance?

Disability insurance is crucial since it protects people’s most valuable asset:  the ability to earn a living.  For the majority of workers, their largest asset is their ability to generate reliable income.  Since insurance policies are designed to protect valuables, it’s only natural that a person would want to protect his most valuable asset (himself) with disability insurance.

Actuarial tables show that most young workers have a greater risk of being disabled for 90 days or more than they have of dying.  Indeed, one in every three 45-year-old men has a 44% chance of suffering a disability that lasts at least three months, before he reaches retirement age.

Many people have life insurance to provide financial protection for their families when they pass away.  But, economically speaking, a disability of the breadwinner may be more costly to a family than a death. In both cases the regular salary is stopped but with regard to the disabled person, he still requires maintenance and possibly expensive medical care.

Check the Details

Most disability insurance plans are designed to pay a set percentage of your income for certain period of time, or perhaps for life. Typical payouts may range from 60 – 75% of your pre-tax income.  “Income” does not include bonus checks from your boss or any other perks of employment. (If your employer provides you with other benefits, these  benefits might stop if you are disabled.)   Depending on your policy, there may be enough money coming in to meet the most important of your expenses, but the payout from the insurance company will probably not stretch to allow for saving or discretionary spending.

When you next review your financial plan, pay special attention to your insurance coverage.  Don’t let this coverage slip through the cracks and be the forgotten part of your financial planning.


Disclaimer: This article is for educational purposes and is not a substitute for investment advice that takes into account each individual’s special position and needs. Past performance is no guarantee of future returns.