Why Get Disability Insurance?

Why Get Disability Insurance?

Disability insurance compensates a portion of your income when you can’t work, and can help you in paying for expenses such as food, utilities, and home and car payments. Disability insurance is important if you or other people (like your family) rely on your income.

If you and others depend on your income

Disability insurance is important if you or other people (like your family) rely on your income. Social Security disability benefits can help in the long run, but aren’t available unless your disability affects you for more than a year.

A good rule of thumb is to protect 60-80% of your after-tax income

You should look for a disability policy that will cover all of your essential costs of living, which is usually 60% or more of your after-tax (not your gross) income. Social Security payments alone may not be enough to support you.

Find out how much disability insurance you get at work

Both Short Term and Long Term Disability insurance coverage may be offered through the benefit package your employer provides. If disability insurance is provided, you should examine your plan to find what the disabled benefits are and when they can be used.

You need it even if you’re young and healthy

Twenty-five percent of 20 year-olds will experience disability before the age of 67. Disability insurance costs less and is easier to acquire if you are young, healthy and working.

Consult a financial professional or do your own online research to determine how much disability insurance you might need.

The financial strength of the insurance company you buy from matters

Disability insurance policies are long-term contracts between you and your insurance provider, so ensuring the financial health and stability of your insurer is crucial. Most insurers are rated by A.M. Best or other national services and you can find that information online.

What Alternatives to short-term disability insurance?

Short Term Disability Insurance can only be provided by an employer. If you can’t get a Short Term Disability Plan, an emergency savings fund that contains between three to six months salary is the best substitute.