When we think about financial planning, we often focus on the big-ticket goals: saving for retirement, funding our kids’ education, building wealth. But what about protecting the income that makes all of that possible?
That’s where disability insurance comes in—and yet, it’s one of the most overlooked pieces of a solid financial plan.
What Is Disability Insurance?
Disability insurance is designed to replace a portion of your income if you’re unable to work due to illness or injury. Think of it as income protection. If something happens that prevents you from doing your job—whether short-term or long-term—this coverage can help ensure your bills still get paid, your savings stay intact, and your financial goals remain within reach.
There are two primary types of disability insurance:
- Short-Term Disability (STD): Typically covers 3 to 6 months and often kicks in after a short waiting period.
- Long-Term Disability (LTD): Provides benefits for a longer period (sometimes years or even until retirement), often following a longer elimination (waiting) period.
Both types can be offered through your employer or purchased individually.
Why Disability Insurance Matters
You might be surprised to learn that 1 in 4 of today’s 20-year-olds will become disabled before reaching retirement age, according to the Social Security Administration. Most of these disabilities are caused by illness, not accidents. Cancer, back injuries, mental health issues, and chronic conditions can all make it hard—or impossible—to work for a time.
Without disability coverage, many people are forced to dip into their emergency funds (if they have one), rack up credit card debt, or rely on family members for support. It doesn’t take long for a financial setback to snowball into a full-blown crisis.
How Disability Insurance Fits into Your Financial Plan
Disability insurance serves as a safety net. It ensures that your financial plan doesn’t unravel when life throws a curveball. Here’s how it supports your broader goals:
- Protects your ability to pay essential bills (mortgage, utilities, groceries)
- Preserves your savings and emergency funds for true one-off emergencies
- Maintains contributions to retirement accounts
- Reduces financial stress, allowing you to focus on recovery
What to Consider When Choosing a Policy
Every situation is different, but here are a few key things to review:
- Coverage Amount: Most policies replace 60–70% of your pre-disability income.
- Waiting Period: How long before benefits kick in?
- Benefit Period: How long will the benefits last—months, years, or to retirement?
- Definition of Disability: Does the policy cover you if you can’t do your job or any job?
Working with a knowledgeable advisor can help you navigate these options and determine what level of coverage is right for your needs.
At PlanSimple, we believe financial planning is about preparing for the unexpected just as much as it is about dreaming big. Disability insurance plays a vital role in keeping your financial life on track—no matter what comes your way.
Let’s talk about how to protect your income and your peace of mind. CLICK HERE to make an appointment.