What is Disability Insurance?
Disability insurance provides you with financial security by replacing a portion of your income when an accident or illness causes you to be disabled and unable to work or earn an income
The monthly benefit amount available is tax-free and will be based on the person's earned income. The maximum percentage of income available typically ranges from 40% to 75% of earned income.
Most people own life insurance and understand the value it provides. They know that a premature death could have serious financial consequences for the people who depend on them. Perhaps these people should consider how different the consequences would be if they were to become permanently disabled.
Wouldn't their dependents be in a worse position than if they had actually died? Not only would their income stop, but they would become a financial drain on the scarce resources available to those dependents.
This drain would take the form of both on-going living expenses and the additional cost of medical expenses for the disabled person.
What is your greatest asset?
A person who is currently 35 years old and earning $60,000 annually has potential earnings in excess of $2.5 million. Therefore, while a person’s car and home may certainly be valuable assets, the ability to work and earn an income is clearly a far greater asset.
Death vs. Disability
Most people are unaware of have common disabilities are. Often people have purchased life insurance to protect their families in the event of death. After-all death is understandable, “inevitable” and visible. People see obituaries in the newspaper and they go to funerals. Events are generally not held for disability and, often, disability is invisible (e.g. deafness, back pain, heart condition, etc.) The result is that, while many people buy life insurance, most people don’t purchase disability insurance.
In fact, the odds are far greater that a person will become disabled in a given year that that he or she will die. The chart below shows there is at least a greater chance of suffering a disability of at least 90 days as compared to the chances of death in any given year. While death may be inevitable, disability is more probable at any give age.
Number per 1,000 Disabled
Number per 1,000 dying at given age
Chances of disability compared to chances of death
|32||8||0.98||8 to 1|
|37||9||1.16||8 to 1|
|42||11||1.70||6 to 1|
|47||13||2.69||5 to 1|
|52||17||4.37||4 to 1|
|57||21||7.18||3 to 1|
Why should I purchase disability insurance now?
As with most types of insurance, the older you get the more expensive the insurance coverage will become. Statistically, you may be more likely to become disabled as you get older. It is not guaranteed that you can be insured and as you increase in age, it becomes more difficult to acquire a disability insurance policy. More importantly, an accident or debilitating illness could strike at any time.