Disability Insurance 101

Think about it. What would happen if suddenly, due to an illness or injury, you were unable to work? The ability to earn a living is far and away most people’s largest “asset.” Learn how to protect your income if you become unable to work in the event of an injury or illness.

Why is disability insurance important?

Your ability to earn a living is your most important asset. And one of the best ways to protect it is with disability insurance. Think of it as insurance for your paycheck. Disability insurance provides you with a percentage of your income if an illness or injury prevents you from working and earning a living. You don’t hesitate to insure your home, car and phone, so why wouldn’t you also protect what pays for all those things—your paycheck.

Do I need disability insurance if I work?

Disability insurance is something anyone who works and has earnings should consider. That’s because one in four people today will become disabled¹ and potentially face financial hardship at some point during his or her working life. Disability insurance income helps cover expenses if you can’t work because of an illness or injury. There are disability insurance policies tailored to workers in specific professions as well as disability insurance for self-employed individuals.

What are the types of disability insurance?

There are two main types of disability insurance: short-term disability insurance and long-term disability insurance. Short-term disability insurance covers lost income for about three months while long-term disability insurance typically pays a portion of your lost income for anywhere from one year to your entire life.

How much disability insurance do I need?

You can calculate how much disability insurance you need by adding up your monthly expenses. Then add up how much disability insurance you already have as well as any personal savings you could draw on if you couldn’t work. If that number is less than your monthly expenses, consider buying more disability insurance. You can also use our Disability Insurance Needs Calculator to get an idea of how much you would need if an injury or illness prevented you from working.

How do I get disability insurance?

The main ways to get disability insurance are: through your employer, through a professional organization, or on your own. Buying disability insurance yourself, through an insurance company, is typically the most flexible and reliable way to get coverage. A licensed insurance agent can get you a disability insurance quote. You may also be eligible for government disability benefits as well—just be aware that they’re usually not enough to replace your lost income.

How much does disability insurance cost?

The cost of disability insurance depends on several factors. Just some include your benefit amount, benefit period, occupation, health status, age and terms of the policy. As a general rule of thumb, the disability insurance cost for a long term individual policy is 1% to 3% of your annual salary.

How should I manage my disability insurance policy?

It’s always a good idea to review your disability insurance with a licensed insurance agent whenever you experience a life change. This can include accepting a new job, getting married, welcoming a baby, assuming new debt or receiving a substantial raise at your job. It’s also a good idea to review your disability insurance benefits once a year with your agent to make sure everything is in good shape.

How do I receive disability insurance benefits?

You can file a claim to receive disability benefits through your employer’s human resources department if your policy is through work or through your licensed insurance agent if you bought the policy on your own. To receive disability insurance benefits, you will have to meet the disability definition as it’s defined in your policy. There may also be a disability insurance elimination period, which is a waiting period that can last anywhere from a few weeks to a few months before you can receive benefits.

Real Life Story

Thanks to disability insurance a family is able to maintain their lifestyle.

Scott Rider’s healthy life changed when he was diagnosed with Parkinson’s disease at just 47. The cognitive and physical limitations caused by the disease meant he had to give up the profession he loved.

Fortunately, he purchased disability insurance when he was just starting out and increased it as his salary grew, which enabled him and his family to maintain the lifestyle they’ve always known.

¹ Social Security Administration, Social Security Basic Facts, 2021

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