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When people think about disability income (DI) insurance, they often picture someone who’s scraping by, paycheck to paycheck, and desperately needs a backup plan.
That’s not you, right?
You’ve built something. A strong portfolio. Real estate. A few investment accounts. Maybe a vacation home. You’ve done well — and your net worth proves it.
But here’s the catch: Net worth and liquidity are not the same thing. And when it comes to protecting your lifestyle in the event of a disability, liquidity is what pays the bills.
Of course, it's important to realize that a disability can affect people of all socioeconomic levels. In fact, the Social Security Administration reports that roughly 25 percent of 20-year-olds will experience a debilitating illness or injury before retirement.
But there can be significant risk for those with a lot of assets at stake.
“Those who have built strong financial foundations, like professionals and business owners, often don’t realize how much they stand to lose if they get sick or hurt,” said Chris Coburn, head of DI/LTC product innovation and development at MassMutual. “They really need to take a step back, look at what’s at stake, and have a plan. That’s why DI insurance is so important.”
Let’s break this down.
Net worth looks good on paper, but …
Your net worth is a snapshot of everything you own: your home(s), investment properties, bank and retirement accounts, vehicles, stocks, businesses, collectibles — you name it. (Related: Calculating your net worth)
And while it’s impressive, much of it is illiquid, meaning you can’t (or don’t want to) turn it into cash quickly without taking a hit.
If you became disabled tomorrow and your income stopped, what would you do?
- Sell your vacation home? In a soft real estate market, that could take months, even years — and that’s assuming you’re emotionally ready to part with it.
- Liquidate your stock portfolio? Depending on the timing, you might be selling at a loss. Plus, that could affect long-term growth and future wealth.
- Dip into retirement accounts? Be prepared for taxes, potential penalties (especially if you’re younger than 59½), and undermining your future financial security.
- Sell your business or rental property? That might feel like ripping the foundation out from under everything you’ve built.
In short, high net worth doesn’t mean you’re financially protected. It just means you’ve accumulated assets. And when you’re disabled and unable to earn, those assets may suddenly become your lifeline — unless you’ve taken steps to replace your income another way.
Income protection for high earners
Disability income insurance is often misunderstood. Many think it’s a safety net only for those without savings. But in reality, DI is one of the smartest tools a high-income individual can use to help protect their assets.
Think of DI as a way to safeguard the income engine that made your net worth possible in the first place.
Let’s say you earn $300,000 a year and become too sick or injured to work. If you’re 45 and planned to work until 65, that’s potentially $6 million in lost earnings. Would you really want to sell off pieces of your life’s work to cover that? Or would you prefer a monthly check that keeps your cash flow going so that you can help maintain your lifestyle and keep your financial plan intact? (Calculator: What would a disability do to my finances?)
DI can preserve your liquidity — and lifestyle
Disability Insurance doesn’t just pay the bills. It may keep you from having to unravel everything you’ve built.
The right policy can help ensure:
- Your mortgage gets paid.
- Your kids stay in private school or continue with college uninterrupted.
- Your investment strategy stays intact.
- You don’t become a “forced seller” in a down market.
- You get to focus on your health — not your finances.
It’s not about planning for the worst. It’s about protecting your best. Your income is what built your net worth. Why wouldn’t you insure it?
In sum: Don’t confuse wealth with liquidity
Being financially successful doesn’t mean you’re invincible. You might have millions in assets — but if you can’t turn those assets into income without sacrificing your future, you’re exposed.
Disability income insurance is not a luxury. It’s a smart, strategic decision — especially for high-net-worth individuals. You insure your home, your cars, your health. Isn’t it time you insured your ability to earn?
Because in the end, protecting your income means helping protect everything else it provides.
Discover more from MassMutual …
Life insurance and disability insurance: Why you need both
Protecting your paycheck: A cautionary tale
3 reasons an entrepreneur needs life and disability insurance
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