How Disability Insurance Can Cover the Biggest Threat to Your Financial Plan

July 18, 2022

One of the biggest potential disrupters to your plan is getting injured to the point where you can no longer work (either temporarily or permanently). Not only are you unable to earn income or save money, but you likely have ongoing medical bills that can quickly deplete your savings. Not to mention your mortgage, car payment, or student loan bills.

This is not to scare you, but to emphasize the importance of disability insurance. This coverage, which kicks in if you become disabled and can no longer do your job, can be a critical tool in your financial toolbox.

You might say “Courtney, I have coverage through my employer. Isn’t that enough?”. While employer-provided disability insurance is often inexpensive and doesn’t require medical underwriting, it does have some downsides. It’s often not portable, so if you change jobs you would lose your disability coverage. It also might not be enough coverage. Generally employer sponsored plans cover 60% of your income up to $10,000/month. So if you make more than that, you’re not actually getting that 60% coverage that’s pretty standard with a disability policy.

Individual policies (those policies purchased outside of your employer through a broker) are much more customizable and are portable from job to job. You can get coverage beyond the $10,000/month limit, and add riders specific to your life and financial situation. For example, if you have student loans, you can add a student loan rider to your disability policy that will pay out a certain amount specifically for your loans if you become disabled.

We’ll often recommend to clients purchasing an individual policy to obtain “own occupation” coverage. If you become disabled and can no longer do the job that you were trained to do, your insurance will pay out for the term stated on the policy. If you did not have “own occupation” coverage (the opposite of this is “any occupation”), then the policy might pay out for a certain time but then stop if you are deemed able to perform any job and earn income. This could mean a large drop in income and inability to cover your basic expenses.

There is much to consider when thinking about disability insurance, and the folks at LLIS are standing by ready to help you compare policy options and purchase the one that’s right for you. Explore disability insurance further with this handy checklist, and of course you can always schedule a call with Debbie to discuss how a disability insurance policy can fit into your plan.