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What is Disability Insurance?
Disability insurance is designed to protect a person’s income if they are unable to work due to illness or injury. While life insurance protects loved ones after death and health insurance helps cover medical expenses, disability insurance protects the income that pays for everyday living expenses during working years.
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For most people, their ability to earn an income is their most valuable financial asset. Disability insurance helps replace a portion of that income if work is interrupted, allowing financial obligations to continue to be met while recovery takes place.
Why Disability Insurance Matters
Many individuals focus on protecting assets and planning for the future, but overlook the risk of losing income due to a disability. The reality is that disabilities are more often caused by illness than by accidents, and even a temporary interruption in income can create significant financial strain.
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Mortgage payments, rent, utilities, loan obligations, and everyday living expenses do not stop when income does. Disability insurance helps provide financial stability during periods when earning capacity is reduced or eliminated.
How Disability Insurance Works
Disability insurance typically replaces a percentage of earned income if a covered illness or injury prevents someone from working. Benefits are paid after a waiting period and can continue for a defined period of time depending on the policy design.
Coverage can be structured in different ways based on income type, occupation, and overall financial planning goals. Policies may be individual or employer based, and can be shown as short term, long term, or a combination of both.
Disability Insurance and Financial Planning
Disability insurance plays a critical role in a comprehensive financial plan. It helps protect cash flow during working years, supports long term planning goals, and reduces the risk of having to liquidate assets or disrupt retirement strategies due to a loss of income.
When properly designed, disability insurance works alongside life insurance, health insurance, retirement planning, and employee benefits to create a more complete protection strategy.
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