Disability Insurance – What to consider if you think you need coverage

Did you know that you are roughly twice as likely to become disabled during your working years than dying? How’s that for an optimistic first sentence.

In most financial plans, disability is an overlooked component of the wealth preservation process. Everyone has a “it can’t happen to me” attitude…. until it does actually happen.

As you think about adding disability insurance to your financial plan, here are a few items to consider: 

  • Any Occupation or Own Occupation? This is the most important decision when considering a disability policy. Any Occupation Policies will only provide a benefit if the insurer and your physicians certify that you cannot work ANY occupation ever again (please note this is a very simplified definition). Own Occupation Policies provide coverage in the case that you cannot perform your current occupation ever again. For 99.9% of careers, OWN Occupation is the way to go – even with the added premium cost. 
  • Employer provided or portable? Some employers have disability coverage available through group health plans. If your budget is tight, it is better to have this coverage than no coverage at all. With that said, if you leave that employer and have a negative health circumstance arise, obtaining new disability coverage might be difficult and/or more costly. Obtaining the coverage on your own provides portability – meaning that you can switch employers and retain the coverage. 
  • Are you paying premiums with pre-tax or post tax dollars? Most group plans default to using pre-tax dollars to pay your premium. This means that if you are disabled, your disability payments will usually be taxable. If you pay the premium with after-tax dollars, the disability payments are usually tax-free. This is a very important distinction as most insurers will not allow you to fully cover your current income with insurance (most commonly the limit is 60% of your salary). This provides a strong incentive to pay for disability insurance premiums with after-tax dollars. 
  • Has your income recently increased? Disability insurance isn’t a “buy it once and done” type of coverage. Anytime you have a significant increase in compensation, you should review your current policies to determine if additional coverage is needed. 

Have additional questions about disability insurance, schedule a meeting!


This material has been prepared for informational purposes only and should not be used as investment, tax, legal or accounting advice. All investing involves risk. Past performance is no guarantee of future results. Diversification does not ensure a profit or guarantee against a loss. You should consult your own tax, legal and accounting advisors.

Frankly Finances is a registered investment advisor with the state of Florida and only transacts business in states where it is properly registered or is excluded or exempted from registration requirements. Registration does not imply a certain level of skill or training. Please refer to our Form ADV Part 2A disclosure brochure for additional information regarding the qualifications and business practices of Frankly Finances.

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