Something terrible happened to a friend of mine a few years back. He was out hiking with friends just north of the city and a rock fell on his head. It was so random – and so life-changing. At 32, he was unable to work and faced many months of rehab just to learn how to walk and talk again.
That event was a wake-up call for me – as a young(ish) freelance writer, I wondered what I would do if something happened to me and I couldn’t work. I was self-employed and didn’t have any employer benefits. Who would pay my bills? Would I be able to afford any extra medical expenses?
A month after my friend’s accident, I took out disability insurance – and it’s given me peace of mind ever since.
Disability insurance is absolutely essential if you are self-employed. Even if you’re really healthy (like my friend), an accident or illness can change everything.
Even if you have disability benefits through your employer, you should get a clear handle on how they work and how much they’ll cover, especially if you have dependants. Consider buying your own insurance to cover any potential shortfall or think about getting critical illness insurance that pays out a lump sum (say, $500,000) in the event you are diagnosed with a serious disease.
Most policies also give you the option to increase your coverage every year. With two kids and a mortgage, I’ve increased my coverage substantially over the years to make sure I can still take care of my family.
One thing to keep in mind is that some policies don’t kick in until a few months after you’re injured or diagnosed. My policy has a three-month waiting period and we have an emergency fund in place to cover any loss of income for at least that period of time.
Still not sure if you need disability insurance?