Disability Insurance
If you were unable to work for some period of time, what would happen? Losing the ability to earn a living is by far most people’s largest “asset."
Disability insurance is one of the most important types of coverage you can buy. It provides a monthly income in case you can't work due to injury or illness.
Disability insurance replaces a portion of your income when you're unable to work due to an illness or injury. It can also help with medical expenses, which are often more expensive than expected. If you're unable to work due to illness or disability, disability insurance can bridge the gap between your monthly income and your expenses.
Do I need Disability Insurance?
The simple answer is yes. If you have a job or work for an income, likely you need some level of protection from the loss of this income from illness or injury. In your career, you will actually have a three in 10 chance of suffering a disability that will take you out of work for at least 90 days1. A 25-year-old worker who makes $50,000 a year and suffers a permanent disability could lose $3.8 million in future earnings2.
1 The Real Risk of Disability in the United States, Milliman Inc., on behalf of the LIFE Foundation, May 2007
2Who Needs It?. LIFE Foundation. http://www.lifehappens.org/insurance-overview/disability-insurance/who-needs-disability-insurance/
How much disability insurance do I need?
This depends on your individual circumstance. Taking into account any coverage you may already have from a workplace, most insurance companies will allow a policy up to 60% of your pre-disability earnings. It’s important to think about not only your reoccurring monthly expenses, like a mortgage or other major monthly expenses, but also the medical expenses that often come alongside a disability. In other words, oftentimes with a disability, monthly expenses actually increase!
What about Social Security Disability?
The federal government covers most workers for a disability, but qualifying isn’t always easy. According to the Social Security Administration, 62% on average were denied claim3. For those who did receive benefits, the average monthly benefit was $1,146, or just over the federal poverty level (single person household, 2015).
3Annual Statistical Report on the Social Security Disability Insurance Program. Social Security Administration, Office of Policy, Office of Research, Evaluation, and Statistics. 2013.
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