Earlier this summer, I encouraged exercising the freedom to “obligate ourselves by choice,” but we will likely encounter an interruption or two. Sometimes, these interruptions are joyous – a new connection, a trip to a bucket-list destination, or a happy accident.

At other times, an interruption can cause fear as we face uncertainty. Four years ago, a dear friend of mine was facing this: at age 40, he received a heart-related diagnosis which robbed him not just of the ability to earn an income for his family but also his pride. Newly married, depression set in as well. He felt like a failure even though he wasn’t (and isn’t!). He and his wife began the arduous task of filing for Social Security Disability while navigating a drastic reduction to their household income. They had to choose to find new meaning and adjust their goals for their life together while utilizing their available resources.

Disability insurance is one option to replace income from working if you become injured or ill. Your advisor will review your need for and access to this wealth management tool this fall. We will also be clarifying some terminology for you to unpack what a disability is and what it is not.

The Basics

Disability insurance is a form of earned income protection, that safeguards against a loss of wages for a season of time. This could range from a few weeks to years. How you become disabled can impact how long your policy will provide benefits.   

Many employers offer some type of coverage, and many states offer coverage, as does the federal government with the Social Security Disability Insurance Program (SSDI). Standalone policies are also available through many insurance companies. When purchasing a policy, you should consider your occupation, age, and income.

How and When Do I Qualify?

A qualifying disability can have many definitions across policy types. For example, when a child is born, the policy benefit is often determined by the type of delivery and recovery period for the mother. On the other hand, Social Security Disability payments are much harder to qualify for but can last longer and provide access to Medicare benefits prior to age 65. My friend has been fortunate enough to access these benefits, but only after three years of stressful denials, lifestyle changes, and ultimately the need to hire an attorney.

The Risk

A 2022 study by Social Security reported that 25% of 20-year-olds will become disabled sometime before they reach retirement age. So, the risk becomes not if we become disabled but when and how. Our task is to find a way to control and transfer the portions of risk that we can and continue to take care of ourselves in the meantime.

When life interrupts our ability to earn an income, our future goals can go unfunded, and the stability and sustainability of our plans can be at risk. Finding a way to address this risk proactively is incredibly important early in the plan when income generation is critical, but it can continue to be a priority throughout our working lives.

Protecting your income is essential for staying on track with your goals. Talk with your advisor about disability insurance to ensure you’re prepared for any unexpected challenges ahead.