Disability Income Insurance

What Is Disability Income Insurance?

Disability income insurance (often referred to as DI insurance) provides you with a source of income if you’re unable to work due to illness or injury. While many people think of health insurance as a safeguard, it doesn’t cover the financial fallout of lost wages. Disability income insurance steps in by replacing a portion of your income, ensuring that you can meet your financial obligations while you recover.

DI insurance can help cover day-to-day expenses, like mortgage payments, groceries, and utilities, during a period when you may not be able to work. This coverage is especially critical for individuals whose income is vital to their household’s financial stability.

Types of Disability Income Insurance

There are two primary types of disability income insurance:

Short-Term Disability Insurance: This policy provides coverage for a brief period, typically up to six months. Short-term disability often kicks in after a waiting period (usually a week or two) and is designed to cover temporary disabilities from which you expect to recover relatively quickly.
Long-Term Disability Insurance: This option provides coverage for a more extended period, sometimes lasting several years or even until retirement age, depending on the policy. Long-term disability kicks in after a longer waiting period (typically 90 days or more) and is used for serious illnesses or injuries that prevent you from working for an extended period or permanently.

How Disability Income Insurance Benefits You

Disability income insurance provides crucial financial protection in several ways:

Income Replacement: The primary benefit of DI insurance is replacing a portion of your income. This ensures you can maintain your lifestyle and continue paying bills even if you’re unable to work due to a disability.
Protection for Self-Employed Individuals: If you’re self-employed or run a business, disability insurance can act as a safety net. Without an employer’s benefits, you bear the full risk if you’re unable to work. DI insurance can prevent you from draining personal savings or falling into debt during recovery.
Covers More than Work-Related Injuries: Many assume that worker’s compensation will cover disability costs, but this only applies to work-related injuries. DI insurance provides protection even for disabilities caused by illnesses or accidents outside the workplace.
Preserves Your Retirement Savings: Without disability insurance, you may be forced to dip into retirement savings to cover living expenses. DI insurance protects your long-term financial goals by allowing you to avoid early withdrawals or loans against retirement accounts.

Who Is Disability Income Insurance For?

While anyone who relies on their income to cover expenses can benefit from DI insurance, it’s especially critical for:

High-Income Earners: If you’re a high-income professional, your ability to work is directly tied to your financial success. DI insurance can protect a significant portion of your earnings in case of a disability.
Self-Employed Individuals and Business Owners: Without access to employer-sponsored benefits, self-employed individuals are particularly vulnerable to income loss. Disability income insurance provides a financial buffer that can keep your business and personal finances on track.
Primary Income Providers: If you’re the primary earner for your family, a disability can cause a financial strain on your loved ones. DI insurance ensures that your family can maintain financial stability while you recover.
Individuals with Physically Demanding Jobs: If your job requires physical labor or has a high risk of injury, DI insurance is essential. Even a temporary injury can have significant financial implications if you’re unable to perform your duties.

How to Learn More

Disability income insurance provides essential protection that ensures you can maintain your financial independence even if you’re unable to work. If you’re ready to safeguard your income and protect your future, contact us today. Our financial planners can help you evaluate the best DI insurance options for your needs, ensuring that you’re prepared for whatever life may throw your way.

We want our clients to know we’re here to help them no matter what. If you want to know more about how we can help you, schedule an introductory call.

* Any discussion of taxes is for general information purposes only, does not purport to be complete or cover every situation, and should not be construed as legal, tax, or accounting advice. Estate Planning services are provided working in conjunction with your Estate Planning Attorney, Tax Attorney and/or CPA. Consult them for specific advice on legal and tax matters.