Are you so wealthy that you could quit your job today and live large for as long as you please? Maybe you’re one of those big lottery winners who is still only working because it’s so darn fun.

If so, you can move on. For the vast majority of all the rest of you, if you don’t yet have dependable disability insurance covering your household breadwinners, this post is for you. How do you make sure you’ve got coverage that’s cost-effective, and reliable if you end up being sidelined by a disability? That’s today’s “No Dumb Question.”

The “Gray Swan” of Disability

First, let me ask you this: What’s your take on black swans?

Believe it or not, this is a related question. Besides being a big, dark bird, a black swan is also an industry term. It refers to life events that you’re convinced will never happen to you … but if they do, the consequences are monumental. A good black swan is winning an all-expense-paid European vacation. A bad black swan is a fire destroying your home. Or an accident or illness that clips the wings of your career.

Disabilities are more like grey swans, because it’s not all that unusual for a disability to take you out of play for a few months … a year … maybe for good.

Penny-Wise Disability Coverage

Bottom line, if you have a paycheck you’d miss if it stopped coming in for a while or forever, it usually makes good sense to purchase disability insurance to protect you for pennies on the dollar. That said, you don’t want to over-feather an insurance provider’s nest by buying too much or the wrong kind of coverage. Here are three important questions to consider as you go shopping for disability insurance (or as you review an employer’s existing group coverage).

  1. What’s actually covered?

Make sure you’re covered for accidents and illness. If you really want to protect your financial well-being, you want a policy that essentially says: If you’re disabled, you’re disabled – never mind the cause.

  1. How long will it be before the coverage kicks in (and how completely)?

How long will you have to wait before long-term payments kick in? A typical group plan may say something like, “You have to be unable to work for 120 days before benefits begin.” But beware: If you return to work for even a few days during the interim, the “counter” might start all over again. Plus, look for caps or other conditions that could curtail how much of your current income is fully replaced.

  1. What is required to get paid?

A common description goes something like this: “If you are unable to do the most of the important duties of your regular job, you’ll receive X or Y benefits.” But often, those “X” or “Y” factors change if you’re disabled for more than two years.

At that point, some group policies may cut off partial payments, and only keep paying at all if you’re unable to return to any job. This could obligate you to grit your teeth and go back to your position even if you don’t feel ready. That’s no good for you, your coworkers or your clients, who depend on you giving your all.

Worse, it could force you to switch careers – and income stream – from, say, high-end lawyer to minimum-wage bottle-washer. There’s nothing wrong with downshifting your career because you want to. But you really don’t ever want to have to.

About That Group Plan …

Usually a group plan through your employer will offer a short-term income replacement policy for a while – say a few months – before long-term disability coverage begins. Suddenly the policy’s details that you’ve maybe never read before become the most important determinant of your ongoing livelihood. As described above, they’re often not enough to cover your tail feathers.

That’s why many families are best-served by buying a disability policy of their own. It’s nice to have terms you control – No matter who your employer is, what arrangements they’ve made on your behalf (which, by the way, may be subject to change), or where your career takes you.

Taking Control of Your Disability Coverage

Especially if you apply when you’re still relatively young and fit, having your own disability insurance lets you lock in favorable terms and level costs at the outset. For example, you can better ensure:

  • The policy will cover you if you can no longer continue in your own, regular occupation … versus any old job for which somebody is hiring.
  • Coverage continues until retirement and/or pension benefits kick in …  instead of some arbitrary timeframe set by somebody else.
  • You have more flexibility to change your coverage if your circumstances change.

I like to compare disability premiums to the costs you invest in professional development. Both are aimed at securing your career-related income, come what may. I sincerely hope you’ll never need to tap into any disability insurance. But if a black or grey swan does darken your door, having dependable coverage already in place means your life’s hopes and dreams won’t have to fly away too.

What other “No Dumb Questions” can I cover for you, so you can make the most of your personal and professional income? Let’s stay in touch here or on LinkedIn.