Why You Need Long Term Disability Insurance

by Jeff Rose, CPA

There are so many types of insurance that you “must have”. Health insurance provides coverage for medical expenses while life insurance provides financial support for family members left behind when you die.

What about disability insurance? Disability insurance on the other hand protects your income in the event you are unable to work as a result of an accident or injury. In an ideal world everyone would be able to purchase insurance to protect themselves and their finances when the unthinkable happens, however that is not a reality for many individuals.

Who needs disability insurance?

Why You Need Long Term Disability InsuranceIf your employer offers disability insurance, you may be wondering if it is cost effective to purchase this type of insurance on the off chance you become sick or injured and unable to work. The answer to this question is not cut and dry and depends largely on your age, health and financial situation. When I started my career, my employer did not offer long term disability insurance. Even if they would have, I’m confident that I wouldn’t have signed up for it. Primarily, because I didn’t see the value and my health insurance was taking enough out of my paycheck already.

For individuals in their 20’s and 30’s, paying for disability insurance may seem like betting against your ability to continue working. The reality of the situation is far more people become sick or injured and unable to work than one might imagine. On one side of the coin, younger people may still have the benefit of parents or other family members to take care of them or help cover finances.

Conversely, people in this age group are also starting families and carry financial responsibilities that would be jeopardized if their income would suddenly vanish. Providing for a spouse or younger children is one of the main advantages of disability insurance for people in this age set.

I did it for the fam

Ultimately, this led me to taking out my first long term disability policy. With a wife and a new son, I knew it was time to step it up. The bottom line is any person who counts on their paycheck to support themselves and their family should consider disability insurance. Statistically, the chances of suffering an injury or disability that renders you unable to work for 90 days or more are between 30%-50% before the age of 65. Ask yourself right the following questions:

  • What would happen if you couldn’t work for 90 days?
  • Could you pay your bills?
  • What about your mortgage?
  • Could your family survive?

90 Days Of No Income = Ouch

Being out of work for 3 or more months can be devastating to a person of any age, but particularly those who have dependent children and spouse’s relying on that income. Short and long term disabilities are emotionally, physically and financially stressful.

For this reason disability insurance should be at the top of your list of insurance policies to have. Ironically, disability insurance is often overlooked, especially by the younger set who do not think in terms of not being physically able to work. I was one of them.

If you are working and rely on your paycheck to survive, disability insurance is something that should definitely be considered. Many people think they can’t afford “another” insurance premium, however few people can afford not to have disability insurance.

Image credit: zoomar

Published or updated October 5, 2012.
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