Do I Need Disability Insurance? A Guide for Business Owners and Professionals

Your income is your most irreplaceable asset

You've probably heard about life insurance. But here's something many people under 40 overlook: your ability to earn matters more than almost anything else when it comes to planning.

If you're unable to work—even temporarily—that can knock you off track.

If you believe in being a good steward of what you've been given, asking "What happens if I can't work?" is one of the most important questions you can ask. Especially if you're a business owner or you have a high-earning career.

So let's walk through when disability insurance makes sense, what types exist, and how to think about it clearly.

Yes, you can need it—even if you're young and healthy

Most people think: "I'm young, I'm healthy, I'll be fine."

But the statistics tell a different story. The risk of disability is real.

For someone in their 30s with a dependent household, a business, or big career upside, the cost of being out of work for even a year can dwarf many other risks.

The question isn't just "Can I get coverage?" It's "Should I have coverage—and if so, how much and what type?"

Types and definitions matter

When you look at disability insurance, not all policies are created equal. The definitions determine whether you'll actually get the benefit when you need it.

Here are the major types:

Own-occupation ("own occ"). You're considered disabled if you can't perform the material and substantial duties of your specific job or specialty. A surgeon who injures a hand and can't operate may qualify—even if they could take on a non-surgical medical job.

Any-occupation ("any occ"). A much stricter standard. You're considered disabled only if you cannot perform any job for which you're reasonably suited by education, training, or experience.

Modified or transitional own-occ. Hybrids. These may start as own-occupation and later shift to any-occupation, or allow you to do some other work while benefits reduce.

Short-term vs long-term disability. One covers a short absence, the other can cover years until retirement.

Business-owner considerations. For small business owners, "income" isn't just a paycheck—it's what the business needs to keep going. Overhead, payroll, growth. Your coverage should reflect that reality.

Why this matters: If you underestimate how your job is defined, especially if you're in a specialty, you may buy a policy that won't pay when it counts.

Example scenarios: when it really shows up

A surgeon who loses fine motor precision in a finger. They may not be able to perform surgery (their "own occupation"), but they might still consult or teach. If their policy is only "any occupation," the claim may be denied.

A freelance musician who injures their wrist. They can't perform their instrument—their income source. If the definition is too loose (any-occupation), the insurer may say, "You could teach music or work in a music store, so you're not totally disabled."

A small business owner in their 30s who becomes ill for a year. Loss of income, plus overhead, plus the ability to run the business—huge risk. Even if they return after a year, that year might destroy momentum.

These examples show how the definition and type of income matter. Your coverage needs to reflect how you actually earn.

Taxation and cost: two key levers to understand

This is one of the most often-missed parts of disability insurance.

Premiums vs benefits:

If you pay the premiums yourself with after-tax dollars for an individual policy, then the benefits you receive are generally not taxable.

If your employer pays premiums (or your share is paid with pre-tax dollars), then when you receive benefits they're usually taxable income.

Cost of coverage: The premium you'll pay depends on your occupation, the definition of disability, waiting or elimination period, and benefit duration. High-earning specialties or business owners often pay more—but also face more risk.

Stewardship lens: It's not just "Can I afford it?" but "Can I structure it wisely so that if I need it, the benefit arrives net of tax and makes real sense for income replacement?"

Your practical "Do I Need It?" checklist

Here are some questions to ask yourself. Each "yes" suggests you should strongly consider disability coverage.

Am I solely or majorly responsible for earning income for my household?

Do I run a small business or side business that depends on me showing up—physically, mentally, operationally?

Does my career involve a specialty, high skill, credential, or training that could be lost or reduced, thus reducing my earning power?

Do I have savings or other income streams that could cover 12+ months of lost income without derailing my goals?

Could a period of disability (6 to 24 months) destroy the momentum of my business, career, or family finances?

Can I afford a premium that replaces a meaningful portion (say 50 to 70%) of my after-tax income, structured so the compensation is net of tax?

If you answered "yes" to several of those, then you should strongly consider disability coverage. Not necessarily "buy the max possible," but get a defensible, tailored solution.

Pause and take a deep breath

You don't need perfection today. Simply asking the question is already a step in the right direction.

You've looked at the risk. You've considered your income, your business, your specialty. You've seen how definitions and tax treatment make a difference.

Now might be the time to get a quote, run the numbers, decide what coverage makes sense for your situation. Then set a revisit date in your calendar—big career move, business launch, major life change.

Stewardship isn't about fear. It's about freedom. Making a plan because you care for those you love and the work you do.

Want some help thinking this through?

I did too. That's part of why I started my financial planning firm—to walk with folks like you through decisions that feel complicated, but don't have to stay that way.

If you've got questions, reach out. I'm a real person, and I won't pressure you into buying products you don't need. You don't have to navigate this alone.

📩 [Email Me] or 📞 [Schedule a Call]

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