Protect your accomplishments: The value of disability insurance

A man and his daughter enjoying their life knowing their future is protected with disability insurance.

You may think disability insurance is just another added expense you don’t need. After all, there are bills to pay and goals to save for.

But disability insurance actually helps you keep your financial plan on track. Find out the true cost—and value—of adding a policy now.

Why disability insurance?

Here’s the thing: Even though it’s called disability insurance, a policy actually helps give you the ability to keep living life as you normally do.

Disability insurance protects your income if you’re too sick or hurt to work. It works like a “paycheck” to help you maintain your standard of living, so you may not have to pull from savings or derail personal and financial goals.

Why should I buy it now?

It doesn’t matter if you’re single or married, have kids or don’t—it’s always the right time to plan for the future.

And as with most things, the sooner you can add disability insurance to your financial plan, the better. There are two reasons why:

  1. A lower cost of insurance. Individual disability insurance rates tend to increase as you get older. But most policies let you lock in your cost of insurance. That means if you buy a policy now, you may be able to get a lower rate—and enjoy it for years to come.
  2. Flexibility and adaptability. Your policy stays with you, even if you change jobs or careers. You can adjust your coverage as your needs and budget change, too.

The value of disability insurance

Your ability to work and earn an income is by far your most valuable asset. Take a look at how a lifetime of income compares to the typical value of a home or car:

  • Car: $34,9681
  • Home: $239,7002
  • Income: $4,983,0003

The chart below shows what your earnings potential is between your current working age and age 65. Consider all the big and little things your income pays for over this time frame—like housing, cars, education, entertainment, clothing, groceries, and more.

Annual Income$50,000$100,000$150,000
Age 25$3,770,063$7,540,126$11,310,189
Age 30$3,023,104$6,046,208$9,069,312
Age 35$2,378,771$4,757,542$7,136,312
Age 40$1,822,963$3,645,926$5,468,890
Age 45$1,343,519$2,687,037$4,030,556

If an illness or injury prevents you from working for a long period of time, it can significantly affect your income. And while none of us want to think about not being able to work, it happens more often than you may realize.

In fact, 1 in 4 of today’s 20-year-olds will become disabled before they retire.4 It’s almost always because of illness—only 5% of disabilities are due to injury.5

The cost of an individual disability insurance policy is usually around 1–3% of your annual income.6 To put that in perspective, in a month, that’s less than a daily cup of specialty coffee or date night.

Instead of thinking or hoping “it won’t happen to me,” give the gift of knowing the life you’ve worked hard to achieve is protected in the event of a disabling illness or injury.

Have an account with Principal®?

Access it online to see investments, coverage, and more.

How much income protection do you need?

Get personalized coverage options with this easy-to-use calculator.

1 Average new car price, Kelley Blue Book, January 2017 (as seen on https://mediaroom.kbb.com/2017-02-01-New-Car-Transaction-Prices-Remain-High-Up-More-Than-3-Percent-Year-Over-Year-In-January-2017-According-To-Kelley-Blue-Book).

2 U.S. Existing Single-Family Home Sales Price, YCharts, https://ycharts.com/indicators/sales_price_of_existing_homes. As seen on 07/2016.

3 Projected cumulative income of a 35-year-old earning $6,250/month ($75,000 annually), assuming a 5% annual increase to age 65.

4 Social Security Administration, Fact Sheet, January 2017, https://www.ssa.gov/disabilityfacts/materials/pdf/factsheet.pdf.

5 Council for Disability Awareness, Long-Term Disability Claims Review, 2014.

6 Disability income insurance calculations are based on a variety of factors. Disability income insurance also has limitations and exclusions. For specific costs and complete details of coverage, contact your financial representative. This table is for illustrative purposes only.

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