Why Disability Insurance is Critical for Your Business
Why Disability Insurance is Critical for Your Business
For business owners, the financial protection provided by disability insurance is simply a must-have. Disability insurance secures your greatest asset—the ability to keep earning the income you rely on—against the risk of injuries and illnesses. Without it, the negative financial impact of an unexpected disability can sink your business.
Still, the need for disability insurance is often overlooked due to:
- Misconceptions about how it works and the chances of becoming disabled.
- An archaic buying experience that is time-consuming and confusing.
It’s time to set the record straight on disability insurance for the self-employed.
How Disability Insurance Works
Putting a disability insurance plan in place protects your source of income from injuries and illnesses. If you become too sick or hurt to work for an extended period of time, disability insurance can replace a portion of your monthly earnings while you get back on your feet. The benefit amount you receive is treated as tax-free income that you can use to pay bills, buy groceries—whatever you need to maintain your lifestyle.
There are two main types of disability insurance:
Long term disability insurance
Covers serious conditions lasting longer than three months (including permanent conditions), from cancer and heart disease to arthritis and back pain. Benefits typically kick in 90 days after a disability occurs and lasts five years.
Short term disability insurance
Covers temporary injuries and illnesses lasting less than three months that people generally recover from, such as a broken wrist or maternity leave for pregnancy. Benefits typically kick in 14 days after a disability occurs and lasts three months.
Both types of coverage can be obtained individually and as part of a group, such as an employer-sponsored plan. But for self-employed workers, employer-sponsored group coverage is out of the question. This makes owning an individual disability insurance policy all the more important.
Now that you have a better understanding of how disability insurance works, the question becomes: Do you actually need it?
The Facts About Disabilities
Disability insurance is often brushed aside because you don’t think you’ll ever need to use it. This couldn’t be further from the truth. Just take a look at the following statistics about the likelihood of disabilities and their financial impact:
According to a recent study, 25% of today’s 20-year-olds will experience a disability that prevents them from working for at least one year before reaching normal retirement age. It truly can happen to you.
It is reported that 90% of long-term disabilities result from illnesses, as opposed to injuries from accidents. Although freak accidents do happen, serious medical conditions are the most likely to keep you out of work.
The chances of a disabling event happening to you may be much higher than you think. The negative financial consequences it can have on you and your business cannot be ignored, either. Together, these findings underscore the need for a personalized, individual disability insurance plan to protect what you earn throughout your career.
Melissa MacQuarrie, CLU, BBA
Partner/Financial Advisor, Love & Persson Group
