Most times when I speak to individuals on the topic of disability insurance, they are usually completely clueless. This applies across all income brackets.
Long term disability occurs when you are unable to work for an extended period of time due to an illness or injury.The Council For Disability Awareness.states that about 1 in 4 people will become disabled before they retire.
A study by LIMRA International found that disability covered declined from 31% to 14% from 2012 to 20211.
Some employers offer disability insurance, however generally the coverage amount is never enough to fully protect their employees income.
It is most common that employers pay into a group long term disability insurance policy which has a waiting period which can vary from 1 month to 2 years and the typical payout is 60% of the employee’s income.
Because the employer pays for the policy, the employee is required to pay taxes on this income.
Think about your current financial situation.
Are you able to live on 60% of your current income?
If the answer is no, which is consistent with the broader population, you will need to augment your employer’s policy with one of your own. Unlike your employers provided coverage, the benefits from these policies are not taxes since they are paid for with your after-tax dollars.
These policies can last a few year or up to retirement. You can customize them according to your goals.
You can purchase long term disability from any reputable insurer. Similar to how you would purchase any other insurance policy,
- Do your due diligence and understand what you will need
- Shop around for the best combination of price and value
2021 Fact Sheet: Disability Insurance Awareness Month
About Tanya
Tanya Taylor, CPA, MBA is the founder and CEO of Grow Your Wealth. Her mission is to help professionals and business owners ditch bad debt and create a 6 or 7-figure retirement income by learning how money works in 6 steps so that they can build a legacy without feeling stuck.
