A disability insurance provides you with financial compensation in the event of a disability that stops you from going back to work. It covers your future wage by paying a certain percentage of your wage, often around 60-70%, either until you are able to go back to work again or for as long as the policy contracted states that you are entitled to the compensation.
There could be several reasons for somebody being unable to work, including illness, medical conditions or after an accident. The difference with a medical insurance is that the latter only covers your medical bills, not the fact that you no longer have an income to support you financially. In some cases and countries social security might offer a disability coverage, but conditions vary greatly and it might not kick in until after a certain time, sometimes not even til after a year.
Do you need disability insurance?
The chances of becoming disabled before retirement age can be 2 – 3 times higher than the odds of dying before retirement age so there is a relatively big chance you might become disabled at some point. Due to this high chance, disability insurance tends to be fairly expensive. There are several situations in which you might not need disability insurance, including: Continue reading “Step 61: Disability Insurance”