Disability income insurance is known as income or paycheck protection. But what is disability insurance and how does it work? Disability insurance replaces a portion of your income, typically 60-80% of your monthly paycheck if you become too sick or injured to work.
It works the same way as most types of insurance protection. When you purchase a disability insurance policy, you pay a premium to an insurance company. In return, the insurance company agrees to pay the monthly amount outlined in your policy if you are too sick or injured to work. This is considered your policy benefit. You can use it to pay your bills, cover your medical expenses and maintain your lifestyle.
Continue reading to learn more about what disability insurance is, who needs disability insurance and why it’s an important part of any financial strategy.
Who needs disability insurance?
If you and your family rely on your income to contribute to your daily expenses, you need disability insurance. Life can throw some unexcepted curve balls when you least expect it. Oftentimes, accidents aren’t the culprit of a disability. Back injuries, cancer, heart disease and other illnesses cause the majority of long-term work absences.1 Being prepared with disability insurance is key to taking care of both you and your family.
Imagine you become ill and can’t go to work for a long time. The average long-term disability claim lasts a little less than three years.2 Paid time off and sick days won’t be enough to cover a long-term disability, and most people don’t have three years of emergency savings. Three years of income is a lot of money you could be using for your future, including your child’s college expenses or your own retirement. If you rely on your income to tackle your daily expenses, you need disability insurance to protect your income.
Your ability to earn an income is your greatest asset. Don’t let an illness or injury demolish your financial foundation.