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Disability Insurance & Income Protection

Updated: May 2

Protecting your income should be a top priority if you want to maintain your lifestyle and continue providing an income for your family. The only insurance that can protect your income when you become disabled is Disability Insurance. Being knowledgeable with the types of disability insurance, how they work and typical claim process can help you protect your lifestyle.

There are different disability types of coverage that you should become knowledgeable with. Depending on your situation, you might be eligible for coverage through and employer or have to seek options on your own. Disability insurance offered through an employer is a pretty great benefit for most employees. When your income is higher, there might be some constraints and limitations. More often, employers provide long-term disability at zero or little cost to an employee. Short-term disability costs are generally passed on to the employee and the premiums will vary based on age and compensation. When an employee separates from the employer, the benefit is generally not portable and not eligible for Cobra. There are some situations where disability insurance can be portable. If you are self-employed or work for a small business and isn't available, you will need to seek this coverage out on your own.

There are generally four (4) types of coverage, which I will cover below. The first two are more typically accessible through an employer plan, being short-term disability and long-term disability. The second is a hybrid disability insurance plan that can be customized for an individual or professional unique situation and needs. The fourth business overhead insurance is designed for business owners to keep the business operating when they become disabled.

First, there is short-term disability (STD), which can be used for a short duration. STD can start as soon as the occurrence of a disability onsets and can pay out for a short period of six weeks. Another important aspect of STD insurance, when you work for a company that provides this coverage, you would generally have to use other income benefit sources first, such as Paid Time Off (PTO).

Long-term disability generally starts at the six week point of the disability onset. LTD can be structured to pay benefits through retirement age, in the case of permanent disability. If you had STD insurance, that insurance would run its benefit period and then LTD would start. If you elected not to have STD insurance, you might be in a financial pickle until the LTD is able to start. Until the LTD insurance is able to start, you would have to go through your PTO first or personal savings which would hopefully be enough to bridge the gap. If you don't have the recommended six (6) months of savings, then this would be an even more complicated financial situation.

There are also policies for individuals that can a disability insurance hybrid and are customized based on your budget and income specific needs. These aren’t available through an employer and make sense for individual consultants, small business owners, or professionals that are self employed. With this type of policy, it can be structured to pay incomes benefits as soon as day one and last through retirement age, which would be more expensive. It could also start after a customized waiting period and last through retirement, which could help keep the cost affordable. The longer the waiting period to start income benefits, the less expensive the policy.

The last type of policy is Business Overhead Insurance, specifically available to business owners to help keep a business running, if they become disabled. This type of insurance can be pretty powerful in that it will keep on paying salaries, payroll taxes, rent, mortgage payments and other business related expenses. This can help keep people stay employed and the business running while providing an income and hopefully profits.

How do you get disability insurance benefits?

In order to get disability income from your disability insurance, you would have to file a claim. Filing a claim is pretty standard in that you will need to provide information about the injury or disease for processing. The insurance company will need verification from your employer (if the plan is through an employer), details from your healthcare provider and you. Once the details are verified, the benefit payments will be paid out according to the policy details.

In conclusion, disability insurance is not only essential for the financial stability for your, it also offers peace of mind, keeps employees safe, and it's easy to obtain. Regardless of the reason, obtaining disability insurance is vital for everyone who values their future financial stability and wishes to avoid the stress and uncertainty that comes with it. You more than likely have insurance your car, your house, your cell phone and a great deal of other things. Do you have income protection that will help you maintain your lifestyle? Over 50% of bankruptcy filing are attributed to health care costs and most of these filing have health insurance. The reality is that when illness or an injury occurs, expenses go up and income reduces.

I hope that this helps you understand disability insurance a little more and the importance of having the right type of coverage to protect your lifestyle and the ability to keep living your ideal life.

Need help assessing your disability insurance options? Whether you run a business or are self employed we can help assess different options. We can help review and ensure adequate coverage is in place to protect your most valuable income producing source, you! Book a complimentary consultation today!

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