JASMA

If your paycheck suddenly stopped tomorrow, how long could you keep the lights on, pay the mortgage,
and still afford takeout on a stressful Thursday? For most people, the honest answer is “not very long.”
That’s exactly why individual life and disability insurance exist: they’re designed to protect your
income and your family’s lifestyle when life doesn’t follow the script.

Think of life insurance as protection for your loved ones if you die too soon and disability
insurance as protection for you if you live a long life but can’t work for a while (or ever again).
Together, they form a safety net that keeps a bad situation from turning into a financial disaster.

Why Individual Life and Disability Insurance Matter

Many people assume their employer benefits will be enough. They often aren’t. Group life insurance
coverage through work is usually small (often one or two times your salary) and disappears if you quit,
get laid off, or change jobs. Group disability coverage may replace only part of your income, and the
definition of “disability” can be stricter than you’d like.

Individual policies are different. You own them personally, you choose the coverage, and you take them
with you no matter where you work. That flexibility is crucial if:

• You’re self-employed or a contractor.
• You rely on commissions or bonuses.
• You’re the primary breadwinner for your family.
• You have specialized skills (physician, attorney, engineer, etc.).
• You simply don’t want your financial security tied to your HR department.

In other words, individual life and disability insurance are about control. You decide how much coverage
you want, what it protects, and how long it lasts.

Life Insurance 101: How It Works and What to Buy

What Life Insurance Actually Does

Life insurance is a contract: you pay premiums, and the insurer promises to pay a death benefit to your
beneficiaries if you die while the policy is in force. That payout can be used for almost anything:
paying off a mortgage, replacing your income, funding college, covering medical bills, or just giving
your family time to breathe instead of panicking over money.

The real purpose isn’t just “pay for my funeral.” It’s income replacement and
financial stability. You’re turning part of your earning power into a lump sum your
family can use if you’re no longer here to provide it.

Major Types of Individual Life Insurance

Individual life insurance usually falls into two big buckets: term and permanent.

Term life insurance

Term life insurance covers you for a set period, such as 10, 20, or 30 years. If you die during the term,
your beneficiaries get the death benefit. If you outlive the term, the policy simply expires.

• Pros: Typically the cheapest way to get a large amount of coverage.
• Cons: No cash value, no payout if you outlive the term.
• Best for: Covering high-need years, like raising kids or paying off a mortgage.

Whole life insurance

Whole life is a type of permanent life insurance that covers you for your entire life as long as premiums
are paid. It also builds cash value you can borrow against.

• Pros: Guaranteed death benefit, fixed premiums, cash value that grows over time.
• Cons: Much more expensive than term life for the same death benefit.
• Best for: Long-term estate planning, leaving a legacy, or those who value guarantees.

Universal life and other permanent options

Universal life insurance is another form of permanent coverage but with more flexibility. You can often
adjust premiums and death benefits, and cash value may be tied to interest rates, indexes, or investments.

• Pros: Flexible premiums, potential for higher cash value growth.
• Cons: Requires monitoring; if underfunded, the policy can lapse later in life.
• Best for: People comfortable with some complexity and long-term planning.

Other variations (like variable life or final expense policies) exist, but for most individuals, the main
decision is whether to use simple, affordable term life or layer in some
permanent life for lifelong goals.

How Much Life Insurance Do You Really Need?

There’s no magic number, but financial planners often start with rules of thumb:
7–10 times your annual income, or a formula like “10 times salary plus college costs per child.”
Some banks and insurers also suggest income multiples plus a fixed amount per child or using
a method that tallies your Debt, Income, Mortgage, and Education costs (the DIME method).

A practical way to estimate:

• Add up big obligations: mortgage, other debts, future education costs, and final expenses.
• Decide how many years of income you’d want to replace (for example, 10–15 years).
• Subtract your liquid assets (savings, investments, existing coverage).

The result gives you a more personalized target. And remember: a slightly smaller policy you can comfortably
afford is much better than a perfect policy you cancel after two years because the premiums are painful.

Disability Insurance 101: Protecting Your Paycheck

What Is Individual Disability Insurance?

Individual disability insurance replaces part of your income if you can’t work due to a qualifying illness
or injury. With long-term disability (LTD) insurance, benefits often cover around 50%–70% of your income and
can last for years, sometimes all the way to retirement age, depending on the policy.

The benefit goes to you, not your employer or your lender. You decide whether to use it for rent,
groceries, child care, car payments, or that streaming service that mysteriously keeps adding “just one more”
subscription to your life.

Short-Term vs. Long-Term Disability

Most people encounter two main types of disability insurance:

• Short-term disability (STD): Usually covers disabilities lasting a few weeks to a few months.
  It often starts after a short waiting period (like one or two weeks) and may be provided by your employer.
• Long-term disability (LTD): Kicks in after a longer elimination period (commonly 3–6 months)
  and can continue for several years or until a set age, such as 65 or full retirement age.

An individual LTD policy is particularly valuable because it isn’t tied to your employer. If you change jobs,
your individual coverage stays with you a big advantage in a world where job-hopping is normal.

“Own Occupation” vs. “Any Occupation” Coverage

One of the most important (and misunderstood) features in a disability policy is the definition of disability,
especially the difference between “own occupation” and “any occupation” coverage.

• Own occupation: You’re considered disabled if you can’t perform the material and substantial
  duties of your specific job (and sometimes your specialty). For example, if you’re a surgeon who can
  no longer operate due to a hand injury, an own-occupation policy can pay benefits even if you’re still able to
  teach or consult.
• Any occupation: You’re considered disabled only if you can’t perform the duties of
  any reasonable job for which you’re suited by education, training, or experience. If you can still
  work in a different role (even at a lower income), you may not qualify for benefits under this definition.

Own-occupation policies usually cost more, but they provide stronger protection for people with specialized,
high-income careers. If you’ve invested years in training for your profession, it’s worth paying attention
to this definition.

How Much Disability Insurance Do You Need?

Because disability insurance benefits are typically a percentage of your income, the question isn’t
“How big should the lump sum be?” but “How much monthly benefit would let me sleep at night?”

A common target is to cover roughly half to two-thirds of your gross income, since some policies may offer
tax-free benefits if you pay the premiums with after-tax dollars. You may also need to consider:

• How long you could live on emergency savings before benefits start (the elimination period).
• How long you’d like benefits to last 5 years, 10 years, or to retirement age.
• Whether you want cost-of-living adjustments (COLA) to help benefits keep up with inflation.

If you already have group coverage through your employer, individual disability insurance can “top up” those
benefits, filling gaps in amount, duration, or definition of disability.

How Life and Disability Insurance Work Together

Life insurance and disability insurance are like two sides of the same coin: both protect your income, but
in different scenarios.

• Life insurance: Protects your family if you die prematurely. The death benefit
  replaces income and pays off big obligations.
• Disability insurance: Protects you and your family if you live but can’t work and
  earn that income.

Without life insurance, your family’s long-term financial plans can collapse overnight. Without disability
insurance, those plans can be slowly drained by months or years of reduced or zero income. The most resilient
financial plans use both.

Key Decisions When Buying Individual Coverage

For Life Insurance

• Choose term length wisely: Align it with your biggest financial responsibilities years
  until the mortgage is paid off, until kids are out of college, or until your spouse can comfortably retire.
• Decide between term and permanent: Many people use term life for pure income protection and
  add a smaller permanent policy for lifelong goals or legacy planning.
• Consider riders: Options like a waiver of premium (waives payments if you become disabled),
  child riders, or conversion options (turning term into permanent without new medical underwriting) can add
  flexibility.
• Check the insurer’s financial strength: Look for strong ratings from major rating agencies
  and a track record of paying claims.

For Disability Insurance

• Pick the right definition of disability: Own-occupation definitions are usually more favorable
  for highly trained professionals, while any-occupation definitions are stricter but may cost less.
• Decide on the elimination period: A longer waiting period lowers premiums but requires more
  savings. A shorter waiting period costs more but gets money flowing sooner if you’re out of work.
• Set the benefit period: Policies that pay to age 65 or 67 cost more than those that pay only
  2–5 years, but they offer much more protection.
• Coordinate with group coverage: If your employer offers disability insurance, individual
  coverage can be designed to fill the gaps without over-insuring.

Common Myths and Mistakes

“I’m young and healthy; I can wait.”

Waiting might seem logical, but it can backfire. Premiums are largely based on age and health. Buying earlier
usually means lower costs and a higher chance of approval. If your health changes, coverage could become
expensive or unavailable.

“My employer coverage is enough.”

Employer life and disability benefits are a great starting point, but they often fall well short of true needs.
Group life coverage might provide one or two times your salary, while your family might need 7–10 times income
plus extra for debts and education. Group disability benefits may be capped or taxable, and they disappear when
you leave the job.

“Disability only happens in extreme accidents.”

Many long-term disabilities are actually caused by illness cancer, heart disease, back problems, mental health
conditions not freak accidents. You don’t need skydiving habits to be sidelined from work for months or years.

“Life insurance is only for parents.”

Parents with minor children absolutely need to think about coverage, but they’re not the only ones. If someone
would be financially affected by your death a partner, a sibling you support, aging parents then life
insurance may still make sense, even if you don’t have kids.

Real-World Scenarios: How Coverage Plays Out

Scenario 1: The young family

Alex and Jordan have two small kids and a 25-year mortgage. Alex earns most of the household income. They buy:

• $1 million of 25-year term life insurance on Alex.
• A long-term disability policy that replaces 60% of Alex’s income to age 65 with an own-occupation definition.

If Alex dies during the term, the death benefit can pay off the mortgage, fund college savings, and replace income
for many years. If Alex becomes disabled instead of dying, the disability policy keeps money coming in so they can
keep the house and maintain a similar lifestyle.

Scenario 2: The single professional

Taylor is single, has no kids, but has a solid six-figure income and enjoys a comfortable life. A massive life
insurance policy isn’t the top priority, but Taylor does:

• Buy a small term policy to cover final expenses and a few family obligations.
• Invest in a strong own-occupation disability policy to protect that high income.

For Taylor, the bigger risk is losing the ability to work and fund savings, retirement, and future goals.
Disability coverage is the star of the show.

Scenario 3: The career changer

Morgan has changed jobs several times and expects to keep doing so. Relying solely on employer coverage would mean
constantly resetting protection. Instead, Morgan:

• Owns an individual term policy that doesn’t change with each job move.
• Uses employer disability coverage when available but keeps an individual policy as the constant foundation.

No matter what Morgan’s business card says next year, the core protection stays in place.

Experience-Based Lessons: Living With Life and Disability Insurance

When people first buy life and disability insurance, it often feels abstract just another bill on the list.
But once something serious happens in real life, those policies stop being paperwork and start looking a lot
like relief.

One common experience financial advisors hear about is the emotional shift from anxiety to calm. Before getting
coverage, people often worry about “What would happen if…” but they never quite finish the sentence. After
they put a policy in place, the worry doesn’t vanish, but it becomes more manageable. It feels less like a
cliff and more like a sturdy bridge: still high, but at least there’s something solid under your feet.

Families who have actually used a life insurance payout often say the biggest gift wasn’t just the money
it was time. Time to figure out a new budget, time to sell or keep the house on their own schedule, time to
decide whether to move closer to family, or time to grieve without immediately hunting for a second job.
In those moments, the death benefit turns into months or years of breathing room.

The disability side has its own set of hard-earned lessons. People are often surprised by how long it can take
to recover from a serious illness or injury and how quickly savings disappear when income drops to zero.
Those who had only a small emergency fund and no disability coverage often end up burning through credit cards,
dipping into retirement accounts, or relying on family for help. The ones who had a long-term disability policy
in place describe it as “a second paycheck” that kept the basics covered when working wasn’t an option.

Another experience people share is the importance of reading the fine print before you need the policy.
It’s much easier to ask questions about benefit periods, elimination periods, and definitions of disability
when you’re healthy and relaxed than when you’re filling out claim forms after surgery. Policyholders who took
the time to understand their coverage in advance usually feel more confident and less frustrated if they ever
have to file a claim.

It’s also common for people to realize, over time, that their first policy wasn’t perfect and that’s okay.
Maybe they bought a small term policy when money was tight and upgraded later. Maybe they added disability
coverage after seeing a friend or coworker struggle through cancer treatments or a back injury. Protection
doesn’t have to be all-or-nothing on day one; it can evolve as your income and responsibilities grow.

Finally, many people say that talking about life and disability insurance with loved ones brings an unexpected
benefit: it opens the door to bigger conversations about values and goals. Who would you want to support if
something happened to you? What kind of lifestyle would you want your family to maintain? How important is it
to stay in the same house, the same school district, or the same community? These conversations can be a little
uncomfortable at first, but they often lead to clearer decisions and stronger family planning overall.

The bottom line from real-world experience is simple: life and disability insurance don’t stop bad things from
happening, but they can turn a crisis into something survivable instead of catastrophic. People rarely say,
“I wish I hadn’t bothered getting coverage” but they very often say, “I wish I’d gotten more, and I wish
I’d gotten it sooner.”

Conclusion: Turning “What If” Into a Plan

Life and disability insurance for individuals are not about being pessimistic; they’re about being practical.
You already insure your car, your home, and your smartphone without blinking. Your ability to earn an income
and the people who depend on it deserve at least that much protection.

By choosing the right mix of term and permanent life insurance, plus a well-designed individual disability policy,
you can turn scary “what if” scenarios into something closer to “we’d be okay, even if it was hard.” That peace
of mind is worth far more than just another line item in your budget.