Disability insurance is one of the most overlooked yet crucial types of insurance. While many people protect their homes, cars, and health, they often forget to protect their income. If an illness or injury prevents you from working, disability insurance ensures you still receive a portion of your income to cover your living expenses.

According to studies, the risk of becoming disabled before retirement is higher than most people think. Here’s why disability insurance should be a priority in your financial planning.

1. What Is Disability Insurance?

Disability insurance provides income replacement when you can’t work due to illness or injury. Unlike health insurance, which covers medical expenses, disability insurance helps you pay for everyday living costs such as rent, groceries, and utilities.

There are two main types:

• Short-Term Disability Insurance: Covers you for a few months to a year.

• Long-Term Disability Insurance: Provides coverage for several years or until retirement age.

2. Why You Might Need It

Your ability to earn an income is your most valuable asset. Without it, you may struggle to maintain your lifestyle or meet financial obligations. Disability insurance ensures that even if you can’t work, your bills are paid and your savings remain intact.

3. How Much Coverage Should You Get?

Most disability policies replace 40% to 70% of your income. Ideally, choose a policy that covers at least 60% of your earnings to maintain financial stability.

4. Employer-Provided vs. Private Policies

Some employers offer disability insurance, but it may not provide enough coverage. A private policy offers more flexibility and higher benefit amounts, though it comes with higher premiums.

5. Key Policy Features to Look For

• Elimination Period: The waiting time before benefits start.

• Benefit Period: How long benefits will be paid.

• Definition of Disability: Whether you are covered for inability to work in your own occupation or any occupation.

6. Cost of Disability Insurance

Premiums usually range from 1% to 3% of your annual income. The cost depends on your age, health, occupation, and coverage amount.

Conclusion:
Disability insurance is not just an optional extra—it’s a necessity for anyone who relies on their income. By including it in your financial plan, you protect yourself and your family from the financial consequences of unexpected illness or injury.