Protecting Yourself with Disability Insurance

Disability Insurance Explained

Disability insurance is a form of income protection in the event you’re unable to work due to illness or injury. You can choose a short-term plan, which offers benefits for up to six months, or a long-term plan, which can cover you for years. Social Security also provides disability insurance, covering just a percentage of your monthly income.

When you enroll in a disability insurance plan, you’ll pay a monthly premium in order to get covered. If you become injured or ill and need to tap into your policy, your benefit amount will be a certain percentage of your pre-tax paycheck.

Don’t just look at the monthly cost. Look at the claim process to understand exactly how much you get and how quickly you’ll receive it.

It’s smart to make sure you receive at least 60% of your pay, if not more. This type of plan also comes with an elimination period, which you have to wait out before you can take advantage of your benefits. The cheaper the plan you pick, the longer you’ll have to wait.

Who Needs Disability Insurance

Disability insurance is ideal for anyone who doesn’t have the financial means to cover their expenses without their income. Even if you have a white-collar job, you could develop a non-injury related medical issue, such as illness, that could take you out of the workforce.

Although the majority of the American workforce does not have disability insurance, it’s a major financial gap in most households.

Serious outcomes can occur due to a lack of disability insurance coverage. Worst case scenarios include:

• Defaulting on student loans
• Going into foreclosure
• Accumulating credit card debt

 Some basic planning and forethought can prevent these major issues from happening to you.

Frequently Asked Questions

by Lauren Ward

Personal Finance Writer

Lauren Ward is a personal finance writer with nearly ten years of experience covering topics like loans, credit, and real estate. She lives in Virginia with her husband and three children.