When you work full-time, the only way to protect your income from the risk of disability is with disability insurance.
What is disability insurance? Disability insurance, or DI, is a type of insurance policy that protects you from income loss due to disability. With this type of insurance policy, you are guaranteed income if a new disability prevents you from working. Disability insurance is sometimes called paycheck insurance or paycheck protection insurance—it’s designed to ensure you continue to receive a paycheck if a disability interferes with your ability to work short- or long-term.
While it’s easy to ignore the need for DI when you’re a healthy young professional, the risk of disability is worth considering and safeguarding yourself against. Disability is more widespread than death in every age group, and 1 of every 4 American workers find themselves disabled at some point before retirement age.
That’s why every young professional should learn the disability insurance basics outlined below. If you work full-time, DI is a powerful way to protect your income for peace of mind and financial security.
How Does Disability Insurance Work?
Disability insurance benefits replace part of your income in the event a disability prevents you from performing your job duties or continuing to earn income.
So how does disability insurance work?
- You pay a disability insurance premium for coverage.
- If you need to use your benefits, they begin after an elimination period, usually 14-90 days.
- Benefits are paid out monthly (usually 40-80% of salary) in the event of a covered disability.
- You receive benefits for the outlined benefit period.
Benefits received from disability insurance can be used the same way you’d use your earned income; paying bills, contributing to retirement accounts, or necessities like groceries and home maintenance.
How to Get Disability Insurance
You can get DI from any of thousands of insurance companies, but choosing between policies and coverage options can be overwhelming, even if you understand the disability insurance basics.
It’s best to consult a financial professional to pick the right disability insurance policy with a custom-designed plan that fits your income and coverage needs. MyStages® can help you create a custom plan to protect your income.
What Does Disability Insurance Cover?
Short-Term Disability Insurance
- Shorter benefit period of up to one year
- For accidents, injuries, pregnancy, and illnesses
This type of policy includes a benefit period ranging from as little as 14 days to as much as one year. Since the benefits are temporary, you can expect greater coverage, with some plans paying out as much as 70% of your typical earned income.
This type of insurance may be provided for three to six months by your employer as a voluntary or mandatory benefit. It may not be helpful in the event of a long-term disability.
What’s Covered: Injuries, illnesses, pregnancies, and accidents sustained outside the workplace
What’s Not Covered: Work-related accidents and injuries; self-inflicted injuries or those that happen while committing a crime
Long-Term Disability Insurance
- Longer benefit period of up to retirement age
- For long-term or permanent disabilities sustained outside of work
This type of policy is typically offered in five, 10, or 20-year benefit periods. Anywhere from 40-80% of your salary may be covered with monthly benefits after the elimination period.
This type of insurance is usually not offered by employers. Long-term disability insurance policies are designed to protect you and your dependents if a serious disability prevents you from working.
What’s Covered: Chronic pain and illnesses, bone and spinal injuries, mobility issues, heart disease, mental health conditions, and sight or hearing loss.
What’s Not Covered: Medical care; self-inflicted injuries or sickness, or those that occur while committing a crime; injuries sustained on the job
Why You Should Consider Getting Disability Insurance
Every young professional needs the safety net of disability insurance. It’s best to get DI when you’re young—you can lock in lower rates and benefit from income protection for your entire career. As much as we want to believe it can’t happen to us, disabling illnesses, injuries, and conditions can happen to anyone at any time. Protect yourself, your family, and your income with disability insurance.
You can qualify for policies that pay out as much as 80% of your salary and ensure a sudden disability doesn’t leave you with a catastrophic financial burden. Explore income protection options and consult a MyStages® financial planner for tailored advice. We can help you build a customized disability insurance plan that offers the coverage and peace of mind you need as a young professional.
