This month, I want to talk about a type of coverage that does not get enough attention: disability income protection. Some people call it a cousin to long term care insurance because long term care steps in when we are older and not working. 

Disability insurance, on the other hand, protects what may be our most valuable asset during our earning years: our ability to work.

We insure our homes. We insure our cars. But not enough of us insure our ability to earn an income. That is exactly what disability insurance does. Depending on your profession, income and health, the premiums can be very affordable when you consider the alternative.

Why You Need Disability Insurance

Statistics show that every American will be disabled for at least three months during their lifetime. In my thirty-four years in this business, I have seen more than my share of clients who suddenly could not work because of an illness or injury. No one plans for it, but it happens more often than people think.

Disability income protection gives you a financial safety net. It replaces a portion of your income if an illness or injury keeps you from working. It ensures that you can keep up with your bills and maintain your lifestyle even when life takes an unexpected turn.

What You Need to Know

There are several ways to design a disability plan so that it fits your situation. 

The first consideration is the Elimination Period. This is the waiting period before benefits begin. Think of it like a deductible on your health insurance. This defines the number of months you will go after becoming disabled before the policy benefits begin.

Next, you will need to think about your Coverage Period, or how long the policy will pay once your claim begins. You can choose a fixed number of years, such as five years, or coverage that lasts until age 65. 

For example, if you become disabled at age 40 and have a coverage period to age 65, the policy will continue to pay benefits until you turn 65. The right coverage period ensures you have support for as long as you may need it.

The final consideration is the Benefit Amount, which is the amount of coverage you buy. Most companies will insure up to 60 percent of your income. 

If you earn $100,000 a year, for example, you could purchase a benefit of $5,000 per month, which equals $60,000 annually or 60 percent of your income.

Optional Features

Depending on the insurance plans, you can also purchase optional features to add value to your coverage. 

Potential options may include: 

• Inflation Protection, which keeps your benefit aligned with the cost of living;
• Future Income Option (FIO), which allows you to increase your coverage later without new medical underwriting; and
• Automatic Benefit Increases (ABI), which raises your benefit periodically if you choose to accept the increase and pay the adjusted premium.

A key point to remember is that the insurance company underwrites you based on who you are today, not on your status in the future. If you buy coverage as a lawyer and later decide to race motorcycles, your premium and benefits remain the same.

While you are still working and healthy, now is the time to explore disability income protection. Contact me at 954-775-0275 to discuss what it would cost to protect your most valuable asset, your ability to earn an income.