- I injured my eye in a minor accident when I first went full-time freelance and it ended up costing me $US3,000 in medical bills.
- I had enough savings to cover my medical expenses and bills during the month I had to take off work, but I knew I had to purchase long-term disability insurance to cover myself if anything happens in the future.
- I purchased a plan, through the Frelancers Union, because I’m the sole income earner, I’m in good health, and I don’t have any passive income streams. I now pay $US23 per month for coverage.
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Within the first few months of making the leap to full-time freelancing, I had an unfortunate accident involving a piece of cardboard and a short tumble to the ground. As a result, I suffered a scratched cornea. A relatively minor eye injury resulted in a hefty toll to my savings. Two trips to the ER, a handful of visits to an eye specialist, and prescription medications later, I was $US3,000 in the hole. What’s more, I ended up taking about a month off from work.
Thankfully, I had enough money stashed away in my emergency fund to cover the earnings lost during that time and to cover my medical bills. However, the accident also helped me realise how important it is to purchase long-term disability insurance, so I bought a policy through the Freelancers Union; I pay about $US23 per month for my plan, which will cover $US2,500 a month if I’m unable to work. Here’s why I decided to hop on a long-term disability plan.
I’m the sole income earner
While I don’t have any dependents, the fact that I’m single means that I don’t have a second income to fall back on. Because I am the only breadwinner in my household of one, I won’t have any additional means to cover my bills should I get into an accident or become diagnosed with a long-term illness and can’t work for an extended period of time. With long-term disability, though, I can still receive some income.
It’s a scary thought, because I can’t exactly ask my ageing parents for money and was not born wealthy, and I don’t currently have any secondary income, but disability insurance could help cover my expenses until I’m back on my feet and am well enough to work again.
I have inconsistent income
As a full-time freelance writer, my income can be inconsistent. Because I experience both dry spells and lucrative months, it can make it hard to save for a robust cushion. What’s more, I live in Los Angeles, which has one of the most unaffordable rental markets in the country. While the general recommendation is to have three to six months of your living expenses saved for emergencies, what if you can’t work for several years, or even decades?
Whereas short-term disability replaces a portion of your paycheck for several months, long-term disability can cover longer stints. If I’m unable to perform the duties of a writer, after my waiting period, which is 90 days, I can receive a portion of my average income each month from my disability insurance policy.
I won’t be able to support myself in the long-term should I become unable to work
As I currently don’t have any passive income streams – from an Airbnb or rental income, selling e-books, courses, or other digital products – or from a side business, once my emergency fund runs out, I wouldn’t be able to cover my living expenses. When I was shopping around for disability insurance, I made sure that the policy would replace part of my income until I turned 65.
I purchased my policy when I was in good health
I purchased long-term disability when I was in my 30s and in pretty good health. Your rate is dependent on a number of things: the type of work you do; how healthy you are; and your age. Generally, the younger you are when you purchase a plan, the less expensive it will be. The older you are when you purchase a disability policy, the more it will cost you.
My ability to earn is my greatest asset
You might think that the money you have sitting in your savings, investment accounts, and the equity in your home are your greatest assets. But the truth is, it’s your earning potential. When you’re unable to work, you won’t be able to add dollars to your bank account, save for both short- and long-term goals, or build a lucrative side business.
To avoid falling into crippling debt, when my short-term disability ends, long-term disability coverage kicks in to ensure I have some income when I’m not able to tap into my most important asset: my ability to earn money.
Protecting your assets is an essential part of financial wellness. While it can be unsettling to think about, without disability insurance, I would be in danger of not being able to pay for my living expenses for a long period of time should I become unable to work.