What is Disability Insurance, Anyway?
Did you know? You are more likely to become disabled before you retire than die? 1 in 4 20-year-olds suffer a disability before age 65, whereas 1 in 1,700 die prematurely. True story. Everyone knows that Life Insurance pays out if you get hit by a bus and die. But what if you get hit by a bus and live?
I've talked before about how Pirates had disability provisions in their charters and how one of the 90's best hockey players added into his contract, BY HAND, a disability provision (one of my favourite posts). Let's look at the core of Disability, what it does, and how it works.
Disability insurance provides financial support in the event that you become unable to work due to a disability. It is designed to replace a portion of your income, helping you to cover your living expenses and maintain your standard of living.
Why is Disability Insurance Important?
Whether it is due to an accident, illness, or injury, a disability can have a significant impact on your finances. Without disability insurance, you may have to rely on your savings or government support, which may not be enough to cover your living expenses.
How Does Disability Insurance Work?
Disability insurance policies typically provide a monthly benefit that replaces a portion of your income if you become disabled. The amount of benefit is based on your salary and the policy terms. The policy will specify a waiting period, which is the amount of time you must wait before you start receiving benefits. This waiting period can range from a few days to several months, depending on the policy.
When choosing a disability insurance policy, there are several factors to consider:
Benefit Amount: Consider the amount of income you need to replace and choose a policy that provides a benefit that meets your needs.
Waiting Period: Consider the waiting period and choose a policy with a waiting period that you can afford.
Definition of Disability: Different policies have different definitions of what constitutes a disability.
Benefit Period: Consider the benefit period and choose a policy that provides benefits for a period that is appropriate for your needs.
Cost: Consider the cost of the policy and choose a policy that provides the coverage you need at a price you can afford.
You have life insurance, you have home insurance, you have mortgage insurance, heck, even some of us have phone insurance. Your greatest asset is your ability to earn an income over your working career....why not protect that too?
Kenneth Coombs CFP CHS RRC
Ken has worked in the financial services industry since 2005, is a Registered Retirement Consultant, and is a Certified Financial Planner. Ken has written financial planning columns and has been a guest on financial radio and podcast programs.
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