Why Tech Employees Need Disability Insurance

As a financial advisor working in Seattle, one of the questions I often get is, “As a tech employee, do I need disability insurance?” In short, yes. Let’s face it: life is unpredictable, and accidents happen. Disability insurance is one of the smartest ways to protect your income if you can’t work. 

Below, I dive into disability insurance and why it’s a good idea for tech employees.

What is disability insurance?

Disability insurance replaces a portion of your income if illness or injury prevents you from working. It’s especially valuable for tech employees, who rely on their mental skills for high-paying, specialized roles. Simply put, if you use your brain to innovate, manage, or code, losing that ability could derail your career and finances.

Many employers offer disability coverage as part of an employee benefits package, or you can opt for privately funded coverage that you obtain and manage yourself. The common types of disability insurance available are short-term disability insurance and long-term disability insurance. 

• Short-term benefits cover temporary disabilities and replace 60–70% of an employee’s income for a period of time, often up to six months. 
• Long-term disability extends coverage to between 40–60% of pre-disability income. 

How are disability insurance and worker’s compensation different?

Worker’s compensation benefits apply only to on-the-job injuries. Disability insurance covers qualifying injuries or illnesses sustained outside of work. 

The case for disability insurance tech employees

When you are looking out for the financial safety and well-being of your family, you want to prepare for the unforeseen. Imagine you suffer a head injury. You’re okay physically, but your ability to think critically or concentrate is gone. Without disability insurance, how would you maintan your lifestyle? Savings might last a few months, but what then? Disability insurance replaces a percentage of your paycheck, helping you maintain your lifestyle and financial goals. 

Employer plans can fall short

As a tech employee, you may have some disability insurance through your employer. However, these plans often come with limitations:

• Coverage is typically only a portion of your base salary, excluding bonuses or equity.
• Benefits might be taxable if your employer pays the premiums.
• You lose coverage if you leave your job.

Do you work at Google, Amazon, Microsoft, Meta, or one of the other big tech companies? While employer plans might seem generous, they’re not usually enough for comprehensive protection. (Your financial advisor is a great resource to help you understand this benefit and its coverage).

What about Social Security?

You might think Social Security Disability Insurance (SSDI) covers you. The reality is different. SSDI benefits are notoriously difficult to qualify for and often pay much less than your salary. For tech employees accustomed to six-figure incomes, SSDI won’t come close to meeting your financial needs.

Own-occupation policies: tailor-made for tech

For tech employees, own-occupation disability insurance is a good way to supplement employer-sponsored programs. Unlike standard policies, which may require you to be unable to work any job, own-occupation policies pay benefits if you can’t perform your specific role.

For example, if you are a software engineer who can no longer code due to carpal tunnel syndrome, you could qualify for benefits. Then, you can likely still take on a lower-paying, less-specialized role.

Pro Tip: Obtain Coverage While You’re Healthy

The best time to purchase disability insurance is while employed and in good health. Here’s why:

• Premiums are lower when you’re young and healthy.
• Policies may exclude pre-existing conditions if you wait.
• If you’re working, insurers are more likely to approve your application.

Waiting until an illness or injury strikes can leave you unprotected — or force you into paying higher rates.

Talk to your financial advisor about peace of mind for your career and life

At Northern Lights Advisors, we help tech employees evaluate their disability insurance options. We focus on protecting your income and ensuring you have the right coverage, whether that’s supplementing an employer plan or finding an own-occupation policy.

Disability insurance for tech employees is critical to ensuring you can keep living the life you’ve built, even if the unexpected happens. Don’t leave your financial security to chance. Contact us today to schedule a consultation.

Northern Lights Advisors is a fiduciary, fee-only Registered Investment Advisor (RIA) firm based in Seattle, Washington. The information in this article is not intended as tax, accounting, or legal advice. Read the full disclosure here.