Disability Insurance Explained Protecting Your Income and Lifestyle
By Rozmek Team
•
September 25, 2025
What's your most valuable financial asset? It's not your house, your car, or your 401(k). It's your ability to earn an income.
The unfortunate reality is that you are far more likely to become disabled during your working years than you are to die unexpectedly. A serious illness or injury could instantly take away your ability to earn a paycheck, putting your entire financial life at risk.
Disability insurance is the essential safety net that protects that income.
What Is Disability Insurance, Anyway? ????
Simply put, it's "paycheck insurance" or "income protection."
If you get too sick or injured to do your job, a disability insurance policy will pay you a tax-free percentage of your income (usually 60-70%) every month.
The goal is to provide you with a steady stream of cash to cover your essential living expenses—like your mortgage or rent, car payments, utilities, and groceries—when you can't earn your regular paycheck.
The Two Types: Short-Term vs. Long-Term ⏳
Disability insurance typically comes in two forms.
Short-Term Disability (STD)
What it covers: This policy is designed to cover you immediately after you become disabled, but only for a limited time—usually 3 to 6 months.
The purpose: It's meant to bridge the gap until you either recover and return to work, or your long-term disability benefits kick in. It's often offered as a benefit through an employer.
Long-Term Disability (LTD)
What it covers: This is the big one. LTD kicks in after your short-term benefits (or a waiting period) run out. It can last for several years, or even until you reach retirement age.
The purpose: This is the policy that protects you from a truly career-altering or career-ending disability. While many employers offer a group LTD plan, financial experts often recommend supplementing it with a private policy.
The Most Important Feature: The Definition of "Disability" ✍️
Not all policies are created equal. The most important clause in any disability policy is how it defines what it means to be "disabled."
Own-Occupation
This is the best and most flexible definition. It considers you disabled if you're unable to perform the main duties of your specific occupation.
Example: A surgeon develops a hand tremor and can no longer perform surgery. Even if she could go teach at a medical school, her "own-occupation" policy would consider her disabled and pay her benefits because she can't do her job.
Any-Occupation
This is a much stricter and less favorable definition. It only considers you disabled if you're unable to perform the duties of any job for which you are reasonably qualified by education, experience, or training.
Example: With this policy, the surgeon would not be considered disabled because she could still work as a teacher.
Pro Tip: When you're buying a private disability policy, always look for one that offers "true own-occupation" or "own-occupation" coverage.
What About Social Security? (Don't Count On It) ????️
While the U.S. government does have a Social Security Disability Insurance (SSDI) program, it should be considered a last resort, not your primary plan. It is notoriously difficult to qualify for. The vast majority of initial applications are denied, and the definition of disability is extremely strict (you must be unable to do any substantial work, and the disability must be expected to last at least one year or result in death).
Your ability to earn an income is the engine of your entire financial plan. Disability insurance is the policy that protects that engine, ensuring that a health crisis doesn't have to become a financial catastrophe.
The unfortunate reality is that you are far more likely to become disabled during your working years than you are to die unexpectedly. A serious illness or injury could instantly take away your ability to earn a paycheck, putting your entire financial life at risk.
Disability insurance is the essential safety net that protects that income.
What Is Disability Insurance, Anyway? ????
Simply put, it's "paycheck insurance" or "income protection."
If you get too sick or injured to do your job, a disability insurance policy will pay you a tax-free percentage of your income (usually 60-70%) every month.
The goal is to provide you with a steady stream of cash to cover your essential living expenses—like your mortgage or rent, car payments, utilities, and groceries—when you can't earn your regular paycheck.
The Two Types: Short-Term vs. Long-Term ⏳
Disability insurance typically comes in two forms.
Short-Term Disability (STD)
What it covers: This policy is designed to cover you immediately after you become disabled, but only for a limited time—usually 3 to 6 months.
The purpose: It's meant to bridge the gap until you either recover and return to work, or your long-term disability benefits kick in. It's often offered as a benefit through an employer.
Long-Term Disability (LTD)
What it covers: This is the big one. LTD kicks in after your short-term benefits (or a waiting period) run out. It can last for several years, or even until you reach retirement age.
The purpose: This is the policy that protects you from a truly career-altering or career-ending disability. While many employers offer a group LTD plan, financial experts often recommend supplementing it with a private policy.
The Most Important Feature: The Definition of "Disability" ✍️
Not all policies are created equal. The most important clause in any disability policy is how it defines what it means to be "disabled."
Own-Occupation
This is the best and most flexible definition. It considers you disabled if you're unable to perform the main duties of your specific occupation.
Example: A surgeon develops a hand tremor and can no longer perform surgery. Even if she could go teach at a medical school, her "own-occupation" policy would consider her disabled and pay her benefits because she can't do her job.
Any-Occupation
This is a much stricter and less favorable definition. It only considers you disabled if you're unable to perform the duties of any job for which you are reasonably qualified by education, experience, or training.
Example: With this policy, the surgeon would not be considered disabled because she could still work as a teacher.
Pro Tip: When you're buying a private disability policy, always look for one that offers "true own-occupation" or "own-occupation" coverage.
What About Social Security? (Don't Count On It) ????️
While the U.S. government does have a Social Security Disability Insurance (SSDI) program, it should be considered a last resort, not your primary plan. It is notoriously difficult to qualify for. The vast majority of initial applications are denied, and the definition of disability is extremely strict (you must be unable to do any substantial work, and the disability must be expected to last at least one year or result in death).
Your ability to earn an income is the engine of your entire financial plan. Disability insurance is the policy that protects that engine, ensuring that a health crisis doesn't have to become a financial catastrophe.