Benefits of Disability Insurance

What many people don't realize is that in terms of negative financial effect, having a long-term disability can be more severe than death. My general recommendation to clients is to opt in for a disability income insurance policy that they own. You might be thinking "I already have disability insurance from my employer." And while that may be true, oftentimes it's not enough. Here's why: 1. The primary purpose of disability insurance is to replace a portion of your income if you are unable to work due to a disability. This is crucial because your ability to earn an income is often your most valuable asset. 2. Employer-provided disability insurance typically covers only a portion of your salary (commonly around 50-60%) and that may not be enough. Supplemental insurance can increase this percentage, ensuring a higher income replacement rate (i.e., 80% of your salary). 3. Employer-based disability insurance usually ends when you separate from your employer. A personal supplemental policy remains in effect as long as you pay the premiums, regardless of your employment situation. 4. If your employer pays for your disability insurance (which many do), any benefits you receive are typically taxable. So, in addition to only receiving 60% of your salary, it will also be taxed. If you pay the premiums for your own policy with after-tax dollars, the benefits are usually tax-free. 5. With a personal policy, you have more control over the terms and conditions, like the definition of disability, the waiting period before benefits begin, and the duration of benefits, all incredibly important. Most importantly, if you don't remember anything else, take note of this — "Own occupation" is far more superior than "any occupation" as it pertains to the type of disability policy you own.

Partial/Residual is the single most underrated part of a disability plan. It sounds small—even the name indicates it’s not “all that.” I’ve heard some carriers cite that 70% of claims begin with a Partial/Residual benefit. That is because most illness are degenerative. Most people fight for their daily routine instead of opting for full recovery. Others don’t have a choice. They need to work and earn and provide for their family. Here’s how it works: What happens when you have billable hours or if your earnings depend on outreach (like most consultants, attorneys, accountants, etc.)? Say you miss two days a week for chemo and radiation. That’s two days of missed work. And let’s be honest—the fatigue is diminishing your output the rest of the week as well. 40% of your work week. Reduced momentum. At first your bills are still being paid. After all, you’ve already done the work and are earning the balance of what you’ve already delivered. But eventually the time away from work catches up to you. Three months later you finally experience an income loss …of 40%. Maybe more because you’ve lost momentum. You’re focus has been on your recovery but the financial strain is starting to become palpable. It somehow feels sudden and yet you saw it coming for weeks. A partial/residual rider is designed to pay 40% of your maximum benefit to keep you afloat. Example: if you’re earning $10k/month and your max benefit is $6k/month (60% of earnings), then a partial/residual rider could pay $2400/month in this case. But remember—a group plan would be fully taxable. So pay your federal income taxes back and you’re netting about $1800/month. So next time you think “they have a group plan” or “they’ve got a chronic illness rider” and “they’re covered,” just understand they might be feeling the pinch long before they have access to the maximum monthly benefit from these types of plans. An individual DI policy can help ease the financial burden immensely.

Let’s stop thinking disability insurance is for freak accidents. It’s not just for falling off a ladder or getting into a car crash. Disability income insurance exists for when your body gives out or your mind shuts down — and you’re unable to work. Most long-term disability claims are not caused by injuries. They come from: 🎗️ Cancer 🧠 Depression and anxiety 🦠 Autoimmune disease 💥 Chronic pain 🤰 Pregnancy complications The term “disability insurance” creates the wrong impression. It sounds rare or extreme. In reality, these situations are common. They happen to people every day. This coverage is not just for emergencies. It is income protection 💼💵 Your ability to earn a living is one of your most valuable assets. It deserves to be protected. ✅