Let’s go ahead and get this out of the way: Yes, you probably need disability insurance. How much disability insurance you need – and how long you need it to last – depends on your income, the makeup of your household and many other factors. Before we get into the telltale signs you should buy this type of coverage, let’s talk about the different types of disability insurance out there.
Disability Insurance 101
Short-term disability is typically good for a short timeline, say three-to-six months. If you’re unable to work, this coverage usually kicks in after a short waiting period of a few weeks, then covers between 50% to 100% of your income while it’s in force.
Because short-term disability insurance is typically a workplace benefit, it may be covered and paid for by your employer. If you don’t get short-term disability through work, you can also buy a policy on your own. But we typically don’t recommend doing so: Because everyone’s essentially at risk of being unable to work for a brief period of time, private short-term disability policies are expensive and usually not worth the expense.
Long-term disability is an entirely different animal, as it’s typically purchased by the individual. Long-term disability policies usually kick in after a waiting period of three to six months, then provide income replacement for anywhere from a few years up to several decades. The amount of your monthly benefit – and how long you receive it – depends on your policy and its coverage limits. If you’re serious about buying long-term disability insurance that will replace your income for life, you can purchase a policy that lasts until you’re old enough to qualify for Social Security benefits.
Now, you might get some long-term disability at work, but, beyond the fact that it’s contingent on your continued employment, employer-sponsored coverage is generally inadequate.
3 signs you need long-term disability insurance
That’s part of the reason why most people are better off purchasing long-term disability or, at least, supplemental long-term disability insurance on their own. Here are three telltale signs you’re someone who could benefit.
- You're the sole provider in your household. If you’re the sole income earner in your household, disability coverage should be a top priority. If you become disabled and cannot work, you will still need to cover your rent or mortgage, insurance, groceries, utilities and other bills. While a solid emergency fund can come in handy for these situations, it may not be enough. Long-term disability could easily last years or even decades, yet it may only take several months off work to deplete your savings. If your spouse doesn’t work or you’re the sole provider, it’s important to double up your emergency fund with a proper disability insurance policy.
- You could become injured off the job. While worker’s compensation plans can kick in to replace your income if you’re injured on the job, chances are good your disability won’t be the result of a workplace accident. According to WebMD, the most common causes of disability before retirement include arthritis, back pain, heart disease, depression, cancer and diabetes. If you become disabled due to a condition that is not caused through your workplace, worker’s compensation plans will not help you – at least not in the long run.
- You have dependents. If you have kids or other dependents, it’s crucial to make sure your income will be replaced in the event you become disabled. Just like making sure you have enough life insurance in place, the amount of disability coverage you buy will have a direct impact on the quality of life of the people you love should you ever need it.
If you need help figuring out how much disability insurance you need, well, all you have to do is ask! Our geniuses can help you compare quotes and find affordable disability insurance here.
Do You Really Need Disability Insurance?
If you think you’re immune to becoming disabled, think again. According to the Social Security Administration, one in four 20-year-olds will become disabled before they reach retirement age. That’s a sobering figure indeed, but it also goes to show how important disability coverage is.
Unfortunately, there are several misconceptions surrounding disability that prevent people from seeking out this coverage. For example, many people believe they’ll qualify for Social Security Disability benefits if they are unable to work. While this is an option for some people, qualifying for benefits can be extremely difficult and take years to achieve. Not only that, but you’ll have to be able to prove you cannot work in any job – not just the job you had before.
Other people believe worker’s compensation will kick in if they cannot work, while failing to realize this coverage only works if you’re injured on the job. If you hurt your back moving a piano up the stairs at home next weekend, you won’t qualify for worker’s compensation or any long-term disability benefits.
Believing these falsehoods or failing to buy disability insurance for any other reason will leave you with the same result. If you become injured or unable to work, you will need to deplete your assets to pay for your care. Short-term disability offered through your employer may help for a short period of time, but it’s not forever. You can learn more about how disability insurance works here.