Education Center

Retirement Planning

Include disability insurance in your retirement planning

Good retirement planning should include disability insurance.  Of course, disability insurance is important and as we’ve shown on this website, you should obtain the maximum amount of individual, non-cancellable and guaranteed-renewable disability insurance that you can.

But there’s another area that is often overlooked regarding disability – the fact that contributions that are made by you or your company to a retirement plan such as a 401(k) or other retirement plan will also end along with your income when you’re disabled.

It’s possible that you can become disabled, have a disability insurance policy that pays you to age 65 and then your income stops. Since you weren’t putting money into a retirement plan after you were disabled and your employer wasn’t either, you may have insufficient income from age 65 on.

The Solution: Disability Retirement Protection

There’s a special kind of disability income protection that will cover your retirement contributions in the event of your disability. In addition to the income you would receive from your disability policy, this special program would make contributions to a special trust in your name with a trust company, with various options to invest in similar to a retirement plan. The funds will build up and at age 65 you can withdraw the funds, similar to a retirement plan.  If you die before age 65 the value in the account would go to your named beneficiary.

Not only that, you can also include a provision that will increase the deposits into the retirement account based on inflation so the deposit amount paid by the insurance company on your behalf can increase.

How Much Disability Retirement Protection can I Get?

You can apply for additional disability insurance to cover your pension contributions for 100% of the amount that you and your employer put into a retirement program.  This is usually limited to a benefit of $42,000 per year (paid as $3,500 per month).  In some cases it can go higher if you’re over age 50 and are using a “catch-up provision.”

Which Insurance Companies do This?

There are three major insurance companies that insure your retirement contributions
in case of disability.  It can be issued as a separate policy or as a rider to your disability income policy.  The experts at can advise you on the differences, which one(s) make sense and get you quotes for this important coverage. Just call us toll free at 866-691-0100 or email us and let us know you’re interested in disability retirement protection and we’ll get to work on it for you.

What if you have all the disability insurance that you can get based on your income already?

Disability retirement protection may be an answer if you are a professional who has “maxed out” his or her coverage i.e. the insurance companies won’t give you more disability insurance even though your income is not covered fully. Insurance companies have maximum issue limits. No matter your income, some won’t give more than $10,000 per month or $15,000 per month. This type of coverage is issued somewhat independently of your existing insurance. So, if you have hit a ceiling but you and/or your employer do make contributions to a pension plan, here’s an opportunity to get more.