Disability Income Insurance: A Case Study

A Case Study

Paul is a 36-year-old father of two small children. He and his spouse both work full-time to support their growing family. They have a mortgage, two car payments, and a host of other living expenses to pay on a monthly basis. Suppose Paul’s spine was broken in a car accident, rendering him paralyzed. How would his family cope financially with his disability in the short and long term?

Fortunately for Paul and his family, he purchased an individual disability income policy. As a self-employed consultant, Paul understood the hardship that a disability would cause his family and planned appropriately, by insuring his ability to earn income on an ongoing basis. While Paul may never return to full-time employment because of his physical condition, 60% of his salary prior to disability will be replaced by his disability income policy, protecting him and his family for many years to come.

Sources of Disability Income

Disability income protection is provided through the following sources:

  • Government-sponsored programs, such as Social Security disabiliy insurance or workers compensation insurance.
  • Employer-paid or employer-sponsored group disability insurance
  • Individual disability income policies (private insurance), which can protect individuals wen they are not covered by government or employer programs, or when these programs fail to provide adequate coverage to protect an individuals income needs.