When people think about their most valuable assets, they usually picture a home, a retirement account or a car. But for most working adults, the most valuable asset is something less visible: the ability to earn an income. Every bill, savings goal and investment depends on that paycheck continuing.
Disability insurance replaces part of your income if an illness or injury keeps you from working. It's designed to help you keep paying your mortgage, bills and everyday expenses while you recover, so a health setback doesn't become a lasting financial setback too.
Short-term and long-term coverage
Short-term disability insurance typically covers a portion of your income for a limited period, often a few months. Long-term disability insurance begins after a waiting period and can continue for years, sometimes until retirement age, depending on the policy.
Many employers offer group disability coverage, which can be a valuable benefit. However, group policies may replace only part of your salary, may be taxable when paid, and usually end if you leave your job. That's why some people add an individual policy to fill the gaps.
When comparing policies, pay attention to the definition of disability, the waiting period before benefits begin, the length of the benefit period and the percentage of income replaced. These details can make a significant difference when you actually need to file a claim.
Premiums depend on factors such as your age, health, occupation and the features you choose. A longer waiting period can lower costs, but it means relying on savings for longer, so it's wise to coordinate this choice with your emergency fund.
Make it part of your plan
Disability coverage works best alongside an emergency fund, appropriate life insurance and a clear budget. Together, they help ensure that one unexpected event doesn't undo years of careful planning and investing.
Unsure whether you have enough income protection? Book a free coverage review with a Protect Invest Plan advisor.