Tax and Insurance
September 15th, 2020
"Better Safe than Sorry"- The Significance of Disability Insurance
“Better safe than sorry” is a commonly used phrase you have probably heard at least once in your life. Although some may believe this mentality errs too much on the side of caution, it carries huge significance when it comes to disability insurance.
From young adulthood to the time you reach retirement, your greatest asset is your current and future. Your ability to mentally and physically work warrants a steady source of income for you to live on. For most, this source of income is necessary to live on.
Your dependency on your income constitutes a need for disability insurance. As stated on longtermcare.gov, “Disability insurance is intended to replace some of a working person’s income when a disability prevents them from working.” If you can no longer perform your job requirements either temporarily or permanently and do not have disability insurance, then you may be left without any source of income. One benefit of opening a disability insurance policy is they are generally more affordable when you are young and healthy, depending on how much income you generate.
This chart from the CDC depicts the staggering statistics of disability in the U.S. Approximately 1 in 4 adults in the U.S. live with a disability.
This includes mental and physical disabilities which prevent many Americans from working to generate an income. Particularly, like in many cases, when short-term disabilities turn into long-term disabilities.
Disability insurance provided by your employer typically covers ~60% of your income. That’s a significant salary reduction and subsequent lifestyle change. In this case, if you are unable to adapt to such a reduction, it would have been a good idea to purchase a separate disability insurance policy in order to cover the remainder of your salary not covered by your employer’s policy.
For those who are about to start their own company, it may take a couple of years to start taking any steady income, so it is a good idea to purchase disability insurance before you leave your job. This way you can prove income and have coverage for yourself in case anything happens to you while getting your new business off the ground.