Have You Thought About Disability Insurance?

by Miranda Marquit · 0 comments

While few of us really like to think about insurance, and paying premiums. However, the reality is that insurance policies can protect your assets, and make it easier for you to manage large costs related to your property.

What many people neglect to think about, however, is disability insurance. Many of us don’t like to think about the possibility, but there is a chance that you could become sick enough or injured in a way that makes it impossible for you to work. In these cases, disability insurance is very helpful.

Short-Term and Long-Term Disability

There are two main types of disability insurance: short-term and long-term. Short-term policies are designed to help you manage conditions that might take you away from work for anywhere between three months and a year. These policies are designed to provide you with a portion of your salary for a short period of time. A short-term policy covers you for non-permanent disabilities, such as injury or major illness, or it can cover you during the waiting period required before your long-term policy kicks in.

Long-term disability is designed for those who measure disability in years. It might not be a permanent situation, but if you will be out of commission for more than six months or more than a year, a long-term disability policy might help provide you with salary replacement.

Policies differ on terms. You should find out what qualifies as short-term and long-term, and be clear about waiting periods involved before you purchase the policy. Your premium will be based on the percentage of income you will be provided, or the total amount that you are eligible to receive from the policy.

Can You Self-Insure?

It’s especially important to make sure that you are prepared for disability issues because if you can’t earn money and your family is relying on you, it can be difficult. Disability insurance can help you get through those tough times without destroying your finances.

However, disability insurance isn’t always necessary. In some cases, you can self-insure. You might be able to self-insure with the help of an emergency fund. If your emergency fund is large enough to cover your living expenses for a long period of time, insurance might not be necessary. Building up passive income can also help you self-insure, since you will have a source of income that doesn’t rely on your ability to work. However, building an adequate emergency fund or passive income stream can take years. If you are suddenly struck with a debilitating disease or injury, you might not have the time to marshall your resources.

Some consumers use an emergency fund as a short-term self-insurance option, and then purchase a long-term policy for the major possibilities. The emergency fund can bridge the waiting period. It’s important to carefully consider your options before you purchase a policy. I have a small disability policy designed to help me cover some of my income if something happens to me and I can’t keep writing. However, I also have other assets I can rely on as well. Consider your situation and decide what works best for you.

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