This week’s post builds off of last week’s article regarding life insurance. Insurance is a fundamental aspect of building wealth and protecting your assets and those you love. Life insurance is a hard concept to talk about, because for it to work, it requires your death. Nobody wants to think about their death, and hardly anyone sees it as a near-term possibility, either. The same is true for disability insurance. Nobody wants to become disabled, and nobody ever thinks twice about the chances of it actually happening.
What most people fail to realize about life and disability insurance, is that the insurance isn’t actually for you, it’s for those you love and care about. In the event of your death, your family is protected. In the event of your disability, your income and independence is protected.
Life vs. Disability Insurance – What’s the Diff?
While they are similar in some areas, life insurance and disability insurance offer different forms of coverage. Life insurance is designed to protect your loved ones in the even of your passing, and this is especially true if you have a spouse, children, loans, or debt of any kind. (Read more about it here.) Disability insurance is different in that it protects your income in the event you become disabled.
Disability Insurance, Simplified.
Because the insurance and financial worlds are so intricate, let’s simplify it with an example. Let’s say you don’t have any assets or dependents – meaning no house, no spouse, no kids, and you may or may not have some credit card, student, or auto loans. You are, however, lucky enough to be employed. This means that each month your rent gets paid, your bills get paid, your loans are paid off little by little, your stomach is full, your gas tank is on “F,” (and maybe you have a cute little cat or dog!). All of these things are dependent on your job. Your job is your asset. Your ability to get up, go to work, earn some money, and pay the bills is a huge asset to yourself that most people take for granted.
Everything is good and well until, unfortunately, the unfortunate happens. It doesn’t matter how it happened, but it still happened, and now you are disabled, and unable to work for the foreseeable future.
Imagine the thoughts that would run through your head if this were true. You’d drive yourself insane thinking “What on Earth am I going to do?” If it wasn’t hard enough, your adjustment to a new life being disabled is accompanied by the fact that you are no longer earning any type of income. This means no more debt repayments, no rent payments, no bill payments, not enough food in the fridge, and certainly not enough to feed your happy pet.
It’s sad, right? Nobody wants to think this way, and even the thought of this happening to you seems so unfathomable, there is no reason to think that it could.
Enter Disability Insurance
Think back to all the things that rely on your ability to earn an income. Pretty much everything, right? Disability insurance is a unique way to protect that asset, and protect your lifestyle.
Similar to life insurance, you pay a monthly premium to an insurance company in return for a benefit. Instead of a death benefit, however, the disability benefit replaces a portion of your income in the event you become disabled, and for the duration of your disability.
Your premium costs are dependent on a number of things, mainly – how much of your income you want to replace, your occupation, and how the insurance company defines “disability.” For example, someone who works in construction may pay a higher premium than an lawyer, because a construction worker takes on a higher risk of becoming disabled than a lawyer does. However, a lawyer might make significantly more money than a construction worker. Depending on how much of their income they prefer to supplement, a lawyer will pay higher premiums for a larger supplement percentage of their income.
In the event you do become disabled, the insurance company will pay the agreed income amount back into your pocket. This means your bills get paid and you get to keep your precious pets! It’s a simple solution to a hardly thought-about problem.
Also note: Employers typically offer life and disability insurance benefits. Check with them to see what kind of coverages you may have with them!
Don’t Let Your Disability Disable Your Financial Freedom
Disability insurance protects your income, and by nature, your financial independence. Don’t find yourself disabled one day, begging for loans from your family. While your family may do all they can to support you, you’re putting a lot of pressure and chance on the hope that everything will be cared for during your disability.
Disability insurance assures you an income. Your family and friends can’t do the same. This is an important aspect to think about, especially when you consider their side of the situation. Asking family and friends for money is an uncomfortable and often dividing topic on both sides of the equation. It’s a disservice to you and to them. Disability insurance isn’t just a replacement of income, its also peace of mind. The thoughts you had in the beginning of this post changed from “What on Earth will I do?” to “Thank god I took the right steps to protecting myself and the people I love.” It’s a vastly different emotion, yet such a small price to pay for peace.
Your Money, Your Mindset
Don’t let it slip your mind the one asset that is essential to your lifestyle – your ability to earn an income. It’s an asset that will serve you your entire life, and without it, could cost you dearly. Protecting your assets is an essential part of building wealth, and if you only have one asset, protecting it is paramount.
BrightDimes 
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