Disability planning: considerations to protect your future

When building a solid financial future, many people often focus on investment portfolios, retirement savings, tax efficiency, and estate planning. While all are important, one critical component that often is overlooked is protecting your income in case you become unable to work due to illness or injury.

Disability is more common than many realize. According to the Social Security Administration, there is a 25% chance a worker will experience a disability sometime between age 20 and reaching full retirement age^†.

The engine that powers your financial goals

Regardless of the amount of wealth accumulated, income is often the driving force behind long-term financial success and allows you to sustain your lifestyle, grow your portfolio, and invest for the future.

Imagine a scenario where an individual with an annual income of $300,000 suddenly experiences a long-term disability. Over a 10-year period, that’s a loss of $3 million in potential earnings. Even with significant assets, covering that shortfall without disrupting other financial goals can be challenging.

What is disability insurance?

Disability insurance provides income replacement if you are unable to work because of injury or illness. There are two primary types of disability insurance:

• Short-term disability insurance: Covers temporary disabilities, usually for a few months, offering a percentage of your income during this time.
• Long-term disability insurance: Provides income replacement for extended periods, often years, if you are permanently or long-term disabled.

Self-insuring risks

Some individuals may opt to self-fund the risk of disability without insurance, which can carry risks. While covering short-term disruptions may be manageable for some, the impact of a multi-year or permanent disability may be a different story.

Covering lost income often requires liquidating investments, potentially at an unfavorable time in the market or creating an unexpected tax burden. Instead of putting long-term financial plans at risk, disability insurance may provide a dedicated income-replacement strategy that preserves assets while ensuring continued financial security.

Employer disability plans vs. private disability insurance

Many professionals assume their employer-sponsored disability plan is enough, but group coverage may have limitations:

• Coverage limitations: Policies may offer only a basic level of coverage, replacing 40 to 60% of your pre-disability earnings, which may not be enough to cover your income needs.
• Bonuses and commissions: Group plans often determine benefits on base salary alone, excluding performance-based compensation.
• Taxable benefits: If premiums are employer-paid, any disability benefits received are subject to income tax, reducing the actual amount available.
• Portability: Group coverage usually terminates when the individual leaves the job or organization offering the insurance.

For those with complex financial needs, an individual disability insurance policy may offer advantages, helping ensure:

• Custom coverage: Policies can be adjusted to suit your income level and personal preferences, including bonuses and commissions.
• Portability: Regardless of your job changes the policy stays with you, which ensures continuous coverage.
• Tax-free benefits: If personally funded with after-tax dollars, benefits received are not subject to income tax.

Why business owners need disability insurance

Unlike employees who may have access to disability coverage through their employer, business owners are generally responsible for their own coverage. Business owners should focus on the following:

• Protecting income: Business owners’ personal income is directly tied to the business. Having an income safety net in place may allow you to focus more on your recovery.
• Maintain business continuity: If you are unable to work, the day-to-day operations of the business may suffer. A well-structured insurance plan may help you cover business expenses such as rent, payroll, and loan obligations.
• Protecting stakeholders and key employees: Key-person disability insurance can protect the company from financial strain if a partner or top executive becomes incapacitated. Without these protections in place, a business could face cash flow challenges, operational disruption, or even closure.

For business owners, disability insurance is about both protecting themselves and ensuring their employees, clients, and long-term business goals remain secure.

Preserving lifestyle, investments, and legacy goals

Disability insurance is about preserving financial freedom. A well-structured policy is designed so that:

• Investments stay intact and continue compounding for future portfolio growth.
• Lifestyle and family goals are protected, even if income is interrupted.
• Estate and legacy planning strategies are still on track, avoiding unnecessary disruptions.

Act–don’t leave your financial future to chance

Life is unpredictable, but your financial security doesn’t have to be. Now is the time to focus on protecting your income. Whether you’re evaluating your current coverage, or exploring options for the first time, a well-structured disability insurance plan can provide the confidence that your financial future is more secure, no matter what happens.

Getting the advice you may need

Securing appropriate disability insurance may be a prudent step in your financial plan, ensuring income continuity during unforeseen challenges. Given the complexities and differences in policies, consulting with a financial advisor or insurance specialist can help tailor coverage to your individual circumstances. To learn more, please contact your Huntington Private Bank team to see how we can help, or find a Huntington Private Bank Office near you.