Preparing for the Unexpected: Disability
January 12, 2026
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A wealth builder’s ability to earn income is typically their most valuable asset. Losing an income could very well total a loss of millions of dollars over a client’s lifetime. For example, a 43-year-old earning $150,000/year and planning to work until age 65 would lose $4,329,424 in lifetime income if they became permanently disabled today.1 This would likely be devastating to their short- and long- term financial stability, as even a substantial emergency fund and/or investment portfolio can be depleted quickly, and at the jeopardization of other goals.
Disability Claims at a Glance
- Over 1 in 4 of today’s 20-year-olds will become disabled before they retire.2
- Most people assume most disabilities are caused by accidents; however, this is not true. Approximately 87% of disabilities are caused by illnesses rather than accidents.2
- The most common reasons for group long-term disability claims are3:
- Musculoskeletal disorders (25.2%)
- Cancer (11.5%)
- Injuries such as fractures, sprains, and strains of muscles and ligaments (13.1%)
- Mental health issues (9.1%)
- Circulatory (heart attack, stroke) (7.3%)
- The average disability lasts 31.2 months. For all age groups, about one out of every eight workers will experience a long-term disability that lasts longer than five years.2
Benefits and Limitations of Social Security and Group Disability Income Insurance
- The average monthly benefit paid by Social Security Disability Insurance (SSDI) is only $1,518/mo4, with 70% of initial SSDI claim applications denied in 20245. Given the modest benefit amounts and the strict definition of disability, clients leave a lot to chance by relying on Social Security to cover them if they become disabled.
- Group Disability Income Insurance can be either employer-paid or offered at an affordable premium to employees. However, there can still be potential “group gaps”, with higher earners typically having a greater gap. Limitations of a typical group disability policy are as follows:
- Only covers 60% of base income, sometimes with a monthly benefit cap (resulting in coverage even lower than 60% of base income)
- Doesn’t cover bonuses, commissions, incentive compensation, or employer retirement plan contributions
- Benefits are taxable if the employer pays the premium
- Adopts an “any occupation” definition after 2 years Under an “any occupation” definition of disability, coverage is provided for when the insured is unable to perform duties of any occupation for which they are suited by education, training, or experience (i.e. Client is a pharmacist who can no longer stand for long periods, but can work in a general office role.)
- Offsets for SSDI, state disability insurance, and certain types of income
- Goes away if a client leaves their job for any reason
Benefits and Limitations of Individual Disability Income Insurance
- Individual Disability Income Insurance can complement any Group Insurance, helping provide not only for daily expenses, but also for lifestyle needs and the ability to continue saving toward future goals.
- For those who do not have access to a group disability policy, individual coverage can be even more crucial.
- Individual Disability Income Insurance can be more difficult to obtain than Group Disability since it is individually underwritten. With each year that passes, there is a greater chance that a client may develop a condition that renders them uninsurable. Additionally, the premium for an Individual Disability Policy increases annually with age.
1 Assumes a 2.5% annual increase in income.
2 Council for Disability Awareness
3 Integrated Benefits Institute, Health and Productivity Benchmarking 2022 (released Q2 2024), Long-Term Disability, All Employers. Condition-specific results. https://www.ibiweb.org/tools-analysis/benchmarking
4 Social Security Administration, Fact Sheet on the Old-Age, Survivors, and Disability Insurance (OASDI) Program, December 2024
5 Young, Marr, Mallis, and Associates: Disability Benefits Denial Statistics
For Use with the General Public. Financial Planning and Advisory Services offered through Vicus Capital, Inc., a federally Registered Investment Advisor.
Categories: Financial Planning
Tags: Disability, Disability Claims, Disability Insurance, Disability Policy, Group Disability Insurance, Social Security Disability Insurance (SSDI)
