Why you need disability insurance

You may think disability insurance isn't for you, but you're taking a risk that may jeopardize your and your family's financial security.

Andy Nelson / The Christian Science Monitor
Unless you have a stockpile of gold treasure somewhere, you risk losing your golden goose if you don't have disability insurance.

Remember when you were in school and read Aesop’s Fables? Aesop wrote some pretty popular short stories that would have a good moral to them. One of his stories was about the goose that laid golden eggs!

A man and his wife were blessed to have a goose that would lay one golden egg each day – unfortunately, they felt they weren’t getting eggs fast enough and so they decided to access the gold themselves.

Upon cutting the goose open, however, they didn’t find any gold, just normal goose-guts!

What the man and his wife should’ve done is be content with what they had – but let’s look at the story from a different angle – they should’ve purchased some insurance on the goose!

Now hang with me here a second – can you really buy goose insurance? No, but relate this to your own life – do you have a goose that lays a golden egg?

The answer is YES! Yes, you do. That goose is you!!

Your ability (the goose) to earn an income (the golden eggs) each and every day is an extremely important factor in reaching your financial goals!

No one enjoys talking about insurance, but it’s an important piece to the financial plan so insurance is something that should be reviewed! So let’s take a look at how disability insurance will protect the goose!

Disability Insurance Protects Against the What Ifs

What is Disability Insurance? Well, basically these policies provide income replacement for those who are unable to work.

Generally you will get paid a certain percentage of your take-home pay if you are unable to perform functions of your current occupation.

If you get sick or hurt for a period of time, this insurance will kick in and pay you a salary!

Depending on whether your employer picks up the tab or not on a group policy will determine if the benefits are taxable.

If a disability insurance policy is paid by you then benefits are tax free when received! Most group policies are inadequate, but they are better than nothing.

Who Needs Disability Insurance?

To put it simply, anyone who has earned income needs some form of disability insurance!

Consider this – it’s estimated there are approximately 6 million car accidents per year in the U.S., with 3 million of them resulting in serious injury and around 2 million of them permanent!

Think it can’t happen to you? Think again.

Most accidents don’t result in death. In fact, only about 42,000 of these 6 million accidents are fatal. I don’t mean to downplay the fatalities here, but the point is this - You are more likely to be involved in an accident and get seriously injured than you are getting into a fatal accident!

Put it another way – you are more likely to need disability insurance than you are accidental death insurance.

How Much Does Disability Insurance Cost?

Depending on the type of policy and the benefits, most individual disability insurance policies are relatively inexpensive.

If you have disability insurance through your employer, they might pay for most of it and you might be on the hook for a very small portion if you wanted to increase the benefit!

Let’s say you are covered by a group policy at work that will pay you 60% of your income should something happen and you want to get an individual disability policy to cover the remaining 40%.

Your premiums would generally run anywhere from 1% – 3% of your annual income to insurance 100% of your take-home pay.

Like I said, relatively inexpensive if you want to insure the goose! If Aesop sold insurance his moral of the story might be: It’s better to take a tiny portion of the golden egg to insure the golden-egg layer!

Have you purchased an individual disability insurance policy?

Do you have one through work?

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