How to Protect Your Finances: Protect Your Income with Disability Insurance
In this series of blog posts we provide a few tips on how to use savings, insurance, and legal documents to help protect your finances and your financial security from the challenges you may face one day. In this post we assess the important role that disability insurance might play in your efforts to protect your finances.
Protect your income.
If you are like many workers, your ability to work and earn a living may be your most valuable asset. Lose that ability, and your long-term financial security may be threatened if you end up depleting your retirement savings in order to pay your current living expenses.
Fortunately, there is a type of insurance that can help ensure that you receive an income even when you cannot work. It’s called disability insurance, and it’s designed to replace part of your income for a period of time when you are too ill or injured to work. The income payments you receive from this type of insurance can help you pay for housing, food, utilities, and other expenses that must still be paid even when you are laid up.
What are the odds that you will ever need disability insurance? Greater than you may think. The Social Security Administration estimates that more than one in four individuals entering the workforce today will become disabled before they reach retirement age.
When contemplating the odds that you may one day need to file a claim for disability insurance benefits, be sure to consider that the disability does not need to happen at work to be covered. It might be an injury that occurs outside of work or an illness, such as cancer or a stroke that prevents you from working.
Some employers offer disability insurance. If you have a policy through your employer, it’s a good idea to find out whether it is adequate for your needs. Many employers offer only short-term disability insurance, which pays out benefits for a short period of time, such as three to six months. Some employers may also offer long-term disability insurance, which kicks in for a period of time after short-term disability insurance stops.
When reviewing your current coverage, be sure to take a look at how the monthly benefit is calculated and how long the benefits may continue. You may be able to replace a larger portion of your income or extend the benefit period by purchasing an individual policy to supplement the coverage you already have.
Copper Leaf Financial is a fee-only, fiduciary financial advisor firm with offices in the Burlington and Rutland Vermont marketplaces. We develop a customized wealth management plan designed to integrate every aspect of your financial life. This is "true wealth management" - a holistic, all-encompassing approach that goes beyond just investment advice. Call our office at 802.878.3731 to set up a time to meet and discuss your specific situation.
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Article published in July 2019 edition of Eye on Money. If you would like to be added to our mail list please email email@example.com.