The reality is that all of us will experience disability — to a greater or lesser extent — during our lifetime.
Unfortunately, it is not just a side effect of aging, as there are disasters that can strike out of the blue and leave us less able to live our lives as normal.
Disability income insurance is a means of protecting yourself and your family from the financial ramifications of a serious injury or illness. If you don’t have this type of cover yet, and you are unsure if it’s right for you, here’s a look at when it makes sense to acquire.
If you’re the main breadwinner
This applies whether you live alone, or have a family because the point remains the same; if a permanent disability leaves you unable to work, you will need to find a way to keep paying the bills, and insurance gives you that essential safety net.
Of course, this type of policy does not just account for permanent disability, as it will also kick in should you be prevented from working on a temporary basis.
If you’re a freelancer
If you work full time for a business then you might be less enticed by the prospect of disability income insurance, since you may already be protected by some form of coverage by your employer. However, if you are a freelancer or a contractor, then you will need to take matters into your own hands and ensure that you are not left exposed to financial uncertainty by a disability.
That is not to say that permanent employees do not ever have a need for this type of insurance; in fact, it could be a wise investment because it will cover you in the event that your employer’s scheme runs out. Even so, for people in already-precarious freelance roles, it has an even greater appeal.
If you don’t have a large savings pot
It’s perfectly possible to choose to rely on your savings as a backup plan if your income is disrupted or derailed entirely by disability. However, most people have less than $9,000 set aside for emergencies like this, which is clearly not enough to keep you ticking over for long.
Likewise, even if you do have a sizable stack of cash saved up, you may not want to rely on this indefinitely while recovering from the condition that led to your disability. And if you are permanently disabled and unable to continue working for good, then this is clearly not a sustainable long-term plan.
Thus while there are premiums to pay for disability income insurance, they should pale in comparison to any potential payout you would receive if the worst happens, while also letting you build up savings separately, earmarking these for major purchases or other emergencies.
If you’re relatively young
While you can get disability income insurance up until relatively late in life, it may be less necessary and more costly the older you are. This is because you will not only be a higher risk prospect due to age, but will also likely be on a higher salary, and also have less time to go until retirement, at which point your pension package should deal with your living costs.
Younger people early on in their careers have a shot at getting more affordable insurance, and also have more to gain if they need to make a claim. So weigh your options carefully to decide if it’s right for you.