Disability is one of those things that we subconsciously think won't happen to us. Like it or not, surveys have shown that up to 30% of all people in employment will at one time or another experience some form of disability which causes them to need time from work, whether that is short term, long term or recurring. The only way to protect yourself from debt, were you to become disabled is to take out disability insurance.

Disability insurance is a simple form of insurance that ensures you are covered for any time you need to take off work. It makes sure you don't run into debt and it makes sure all your fixed expenditure is covered for while you are unable to earn. Unfortunately, however, disability insurance is one of the types of insurance that often gets overlooked, especially by those who are self employed or contract workers. For those in full time employment with an employer their contract will usually state that they have disability cover, but this still usually only account for three fifths of their salary and the cover is taxable so it's not even as much as 60%.

To put it simply, not taking out a disability insurance contract is a risk. If you were to become disabled, whether temporarily or permanently, the last thing you want on your mind is bills and debts. If you do have these things on your mind there's often little that can be done anyway and if your disability is a mental condition then the stress of not being able to earn could make the problem worse and last for longer. People with disability insurance may have to pay for it, but they have constant peace of mind and when things go wrong (which they do, for 30% of 35 to 65 years olds in employment) the only concern is getting rest and treatment.

Don't think that all disability insurance is backstreet or that it will tie you down either. You can purchase partial cover if you want insurance for only being able to work part time. You can also purchase insurance that is non-negotiable by the insurance company, i.e. only you can make changes to the contract if your rates change or your situation. Some other policies can only be changed by the insurance company if they decide to raise the fee, but purchasing insurance that is fully negotiable, i.e. the insurance company can change any policy in the contract, is inadvisable.

It's important for every employee, whether self employed, working part time or fully employed by someone to take a look at their disability insurance, even if their work contract claims that they are covered. To have something happen to you and not be covered for it can be devastating and can even lead to bankruptcy and while it seems like a morbid subject to think about when starting up a business or changing jobs, it is far better to be safe than sorry.

Stan Tian

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