How to Avoid a Financial Crisis in Case of Disability
If you would ask Joe, I am sure he would tell you that he would do things differently to prevent the financial troubles he is facing as a result of his accident. Remember the old cliche about an ounce of prevention and a pound of cure? An emergency fund is one such means of prevention. This is simply a cash reserve of approximately six months' income. It should be invested so that it is readily available in the case of an emergency. Money market accounts are ideal for emergency funds.
Disability Insurance
Disability insurance is far and away the most important means of prevention available. Disability insurance was specifically designed to provide the insured with an income in the event of a short-term or long-term disability. Without thinking twice, we insure our vehicles, homes and even our lives through life insurance. Tragically, we too frequently overlook insuring the goose that laid these "golden eggs."
It is true that disability insurance can be expensive, but many employers offer a group disability package that is usually much more affordable. If the premium payments are paid by the employee, then the disability benefits will be received income tax-free. Benefits are taxable if the premium is paid by the employer.
Personal or individual disability contracts are very flexible and can be designed to complement existing group coverage. For example, if your group benefit pays 50 percent of your salary to age 65, you could purchase an individual policy that pays 20 to 30 percent of your remaining income deficiency. Disability insurance carriers do not provide full replacement of income in the event of disability.
 What to Look for in a Policy
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