When people think about protecting their financial future, they often focus on saving for retirement, building an emergency fund, or purchasing life insurance.
One form of protection that is often overlooked is disability insurance. Your ability to earn an income may be your most valuable financial asset. If an illness or injury prevents you from working for an extended period, disability insurance can help replace a portion of your income and keep your financial goals on track.
UNDERSTANDING THE BASICS
Disability insurance provides income replacement if you're unable to work due to a covered illness or injury. There are two primary types of disability coverage: short and long term. Short-term disability insurance typically replaces a portion of your income for several weeks or months after a waiting period. Long-term disability coverage generally begins after short-term benefits end and may continue for several years — or until retirement age — depending on the policy. Most employer-sponsored plans replace between 50% and 70% of your base salary, although coverage levels vary.
WHAT EMPLOYERS TYPICALLY PROVIDE
Many employers offer disability insurance as part of their benefits package, often at little or no cost to employees. Short-term disability coverage is commonly offered as an optional or employer-paid benefit. Long-term disability coverage is also frequently available, and employees may have the option to purchase additional coverage.
It's important to review your benefits carefully. Pay attention to key details such as the percentage of income replaced, waiting periods before benefits begin, benefit duration, and whether bonuses or commissions are included in covered earnings. You should also understand whether benefits would be taxable if you needed to use them.
AN IMPORTANT PART OF FINANCIAL WELLNESS
Disability insurance works alongside emergency savings, health insurance, life insurance and retirement accounts as part of a comprehensive financial plan.
Without adequate income protection, even a temporary loss of earnings could disrupt your ability to pay bills, cover healthcare expenses, or continue saving for retirement (not to mention contributing to a college savings plan or funding other family financial goals).
During your next employer benefits enrollment period (which typically occurs in November of each year), take a few minutes to review your disability coverage. It could be one of the most important financial decisions you make.
Informational Source: Lifehappens.org: “Disability Insurance 101” (accessed June 25, 2026).
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