When financial planners ask their clients to describe their most treasured items, surprisingly some of them talk about sentimental things like time, friends, or family. Others talk about material possessions, like assets or heirlooms.

Almost no one talks about their income. This is surprising, given that one’s earning ability is perhaps the most valuable asset they have.

Your Earning Power And Why It’s Crucial To Use Disability Insurance To Safeguard It

Although most people are aware of the importance of life insurance, many do not recognize that the chances of getting sick or hurt are far greater than that of premature death. 25% of all 21-year-olds today will be disabled by the age of retirement. A staggering 96.5% of all disability-related insurance claims deal with illnesses, not injury. Around 95% of illnesses and accidents aren’t work-related, thus disqualifying them for workers’ compensation.

The following types of individuals stand to lose the most if they don’t have disability insurance coverage:

• You’re the sole breadwinner of your family

Though group long-term disability coverage policies from employers generally cover around 60% of one’s income, it only covers base salaries, leaving out commissions and bonuses. Additionally, employer group disability benefits are taxable. This can lower your coverage amount, as it introduces a major expense with your benefit.

Try purchasing a group or private policy that you pay for using your after-tax income to ensure that your family’s lifestyle will remain unaffected in case you become incapable of working in the future.

• You’re a Contractor or Self-Employed

Even self-employed individuals and contractors need to ensure that their inability to work in the future does not ruin them financially. It’s even more important for them to be covered by a disability insurance policy as self-employed individuals cannot rely on any group policies from a company.

Shop around to obtain an affordable private long-term disability insurance policy. It’s also important to be covered by an overhead expense insurance policy as well. You can use the overhead expense insurance policy to keep your business going through tough times or buy the time needed to make alternative arrangements or come up with an exit strategy in case you become incapable of operating the business going ahead

• You’re in A High-Risk Profession

Individuals in certain professions are at greater risk of sustaining injuries or illnesses than others. Professions like machine operation, construction, or law enforcement obviously fall under this category.

However, if your employment depends on you being able to use a certain body part successfully, it’s crucial to be covered by a disability insurance policy. Surgeons, tradesmen, etc. fall under this category. Do ensure that mental health conditions are also covered under the disability insurance. Many people make the mistake of assuming that a disability insurance policy only covers physical conditions, only to realize the error when it’s too late.

Working professionals must take steps to ensure they’re covered by an adequate disability insurance policy that they can rely upon in times of need. Regardless of your income, it’s crucial to protect your earning ability at all times.

 

 

The opinions expressed by the author are his/her own and are not intended to serve as specific financial, accounting, or tax advice.