Mandy Kloppers

Do you struggle with ill-health? Here’s how to protect your income

If you struggle with ill-health, then rest assured that you are not alone. In spite of our best efforts to maintain a healthy mind, body and spirit, none of us are immune to disability or illness. In this page we look at the world of disability insurance and how this can protect you against loss of income in the event of illness or disability preventing you from working. 

The latest statistics indicate that 10 % of the world’s population live with some kind of disability. 1 in 4 20-year olds today will become disabled before they retire. This rises to a 50% chance of becoming disabled for three months or more by the time you are 35. 

Apart from the loss of career opportunities and to quality of life, this can bring financial hardship to many people and their loved ones. Whether you have student debts to repay, a mortgage or family responsibilities, the cost of living soon adds up. 


Is there any state provision for loss of income? 

Yes, there is limited provision in the form of SSDI-Social Security Disability Insurance. However, this is means tested, very difficult to qualify for and the benefits paid out are likely to be very low.  


Welcome to the world of disability insurance 

Fortunately, you can protect your income in the form of disability insurance. This may be provided through a work place or a private scheme. You may already have a work-based plan to cover you in the event that you are no longer able to work. If this is the case, it is worth checking the small print to make sure the policy covers any change in role. 

If you are partially disabled but still able to do some of your role, you may wish to take out residual coverThis applies if you lose 15-20% of your income and are under the care of a physician. 


Short term and longterm plans 

Short term plans cover disabilities that last for up to a few months. The pay-out is quicker than for long term plans and higher at 60-70% of your salary but it may only last for a few weeks. 

Long term disability insurance takes longer before the policy starts paying out than short term plans. This may be anything from a few months to two yearsIt provides cover for disabilities that last longer than short term plans usually at least six months. You can expect to receive 40-60% of your salary until you return to work, retire or a predetermined term expires. 

Which is best – work based or private scheme? 

This will depend upon your individual needs and the type of policy cover that you are looking for. It is worth noting that tax is deductible on any disability benefit paid by your employer whereas benefits received from an individual insurance policy are tax-free. 

In short do shop around and seek expert advice to ensure your plan meets your needs. 

Photo by Ulises Baga on Unsplash