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Is long-term disability insurance worth it?

Yes, long-term disability is a good investment, especially for people with high incomes or specialized jobs that require a lot of training.

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By

Andrew HurstSenior Editor & Licensed Auto Insurance ExpertAndrew Hurst is a senior editor and a licensed auto insurance expert at Policygenius. His work has also been featured in The New York Times, The Wall Street Journal, Forbes, USA Today, NPR, Mic, Insurance Business Magazine, ValuePenguin, and Property Casualty 360.

Edited by

Anna SwartzAnna SwartzSenior Managing Editor & Auto Insurance ExpertAnna Swartz is a senior managing editor and auto insurance expert at Policygenius, where she oversees our car insurance coverage. Previously, she was a senior staff writer at Mic.com, as well as an associate writer at The Dodo.
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Reviewed by

Maria FilindrasMaria FilindrasFinancial AdvisorMaria Filindras is a financial advisor, a licensed Life & Health insurance agent in California, and a member of the Financial Review Council at Policygenius.

Updated|4 min read

Expert reviewedExpert reviewedThis article has been reviewed by a member of ourFinancial Review Council to ensure all sources, statistics, and claims meet the highest standard for accurate and unbiased advice.Learn more about oureditorial review process.

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Long-term disability insurance, which protects your income if you’re sick or injured and can’t work, is essential if you have a high-paying job or a specialized career, or loved ones who rely on your salary.

It’s worth having your own long-term disability insurance policy even if you have another type of disability coverage, like short-term disability insurance through your job.

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Why we recommend disability insurance

Long-term disability insurance is the easiest and most affordable way to protect your income. If you’re suddenly hurt or sick and can’t work, your long-term disability benefits can help make up your lost earnings — even if you can never work again. 

And can you use disability insurance benefits just like a regular paycheck, on things like groceries, childcare, travel, or loan payments.

The odds of becoming disabled before you reach retirement are higher than you might think. According to the Social Security Administration, more than one in four 20-year-olds will become disabled before they reach retirement age, so it’s important to have the financial security of a long-term disability policy in your back pocket. [1]

What is long-term disability insurance?

Long-term disability is a type of disability insurance that can cover you for years, even up to retirement age. It’s just one type of disability insurance, but long-term disability insurance offers much better protection than short term.

How do I know if long-term disability insurance is right for me?

Disability insurance is best for high-earners (the more you make, the more you have to protect) and people who’ve invested lots of expensive training or education in their careers. You should probably consider getting disability insurance if you work in any of the following fields:

Having a specialized job also means you have more at risk if you’re sick or injured — like if you spend years training as a surgeon and then injure your hand in a sports accident.

You may also need long-term disability insurance if you have dependents who rely on your income and you want to make sure they’re cared for even if you’re no longer able to work.

Pros and cons of long-term disability insurance

Pros

Cons

Protects your income so you don’t have to use up your savings if you’re unable to work

You could pay premiums for years and never end up using your disability insurance.

You won’t have to worry about bankruptcy or foreclosure if you can’t work.

Disability insurance won’t cover any pre-existing conditions.

Your benefits are tax-free as long as you pay for your policy with after-tax dollars.

Can be expensive depending on your job, income level, or health history.

You can get a long-term policy that will cover you until retirement age.

You can maximize your protection with riders or extra coverages.

Is long-term disability worth it for everyone?

While long-term disability insurance can be essential financial protection, not everyone needs it. 

Long-term disability insurance isn’t worth it if you won’t be able to keep up with the payments. If you stop paying for disability insurance, your coverage will lapse and you wouldn’t receive disability benefits even if you were hurt or ill.

You also probably don’t need disability insurance if you’re not worried about losing your income because of an illness or injury. You don’t need disability insurance if you can afford to live normally without the income from your job.

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Is short-term disability insurance worth it?

Yes, short-term disability insurance, which many people get through their jobs, is worth having, but you shouldn’t rely only on it by itself.

Unlike long-term disability insurance, short-term disability insurance only provides benefits for a few months. These benefits will also be taxed if you bought your short-term policy with pre-tax dollars (which might be the case if you got it through an employer).

Is disability insurance worth it if I’m self-employed?

It’s still worth getting disability insurance if you’re self-employed. If you become disabled and can’t work, your disability insurance will still give you the same financial protection as someone who works for an employer.

Getting disability insurance that covers your business overhead expenses may be worth it if you own your own business. Business overhead expense coverage would take care of your business’s loans and contracts, rent, utilities, payroll, and more.

You’ll have to prove to disability insurance companies that you’ve been earning income as a self-employed person for at least two years in order to get coverage.

Is disability insurance worth it with Social Security?

Disability insurance is worth it even if you can qualify for disability benefits from Social Security. Your insurance company might even require you to apply for Social Security if you’re receiving benefits.

That’s because long-term disability insurance can pay out about 60% of your current income, but Social Security typically pays out less than $1,500 a month if you can’t work.

→ Read more about Social Security Disability and private disability insurance

Is individual disability insurance worth it if you have group coverage?

If you have group disability insurance through an employer or another type of organization, it’s still worth getting an individual long-term disability policy.

Although group disability insurance is much cheaper and easier to qualify for than personal coverage, coverage can be limited and your benefits could be taxed. Plus, you’ll lose the policy and your coverage if you leave your job.

Where to get disability insurance

You can get disability insurance from an insurance company that also sells auto or home insurance (like State Farm or Allstate), or from a company that specializes in disability coverage (like Guardian or Assurity).

You can get a policy by working with a licensed agent to fill out an application and compare disability quotes, then go through a medical exam, prove your income, and get a sign-off from a doctor that you’re in good health in order to finalize your policy.

What we like …

BBB rating

AM Best rating

Ameritas

Includes a survivor benefit for your beneficiary if you pass away.

A+

A

Guardian

Offers lifetime continuous benefits for total disabilities, even after the policy expires.

A+

AA+

Massachusetts Mutual

Offers a future insurability rider that's good until your 60th birthday.

A

A++

Principal

Offers a lump-sum payment of $62,400 in addition to regular benefits if you're presumptively disabled.

A+

A+

The Standard

Includes a family care benefit if you have to take time off to care for a sick loved one.

A+

A

→ Read more about how to get disability insurance

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Frequently asked questions

What is covered under long-term disability insurance?

Long-term disability insurance replaces your regular income if you can’t work due to a serious injury or illness, like a back injury from a car accident, anxiety or depression, complications from pregnancy or childbirth, loss of vision, or fatigue from a viral infection.

How long does long term disability insurance last?

Insurance companies usually allow you to choose whether your long term disability insurance will last two, five, or 10 years, or until you reach retirement age (65 or 67).

Is supplemental disability insurance worth it?

Supplemental disability insurance is most worth it if you want to add protection to a plan you got through your employer, or to people whose long-term policies would no longer fully cover their income.

How much does long-term disability insurance cost?

While the cost of long-term disability insurance depends on factors that are different for everyone, like age, location, and job, it’s a safe estimate that disability insurance will cost between 1% and 3% of your annual income.

References

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Policygenius uses external sources, including government data, industry studies, and reputable news organizations to supplement proprietary marketplace data and internal expertise. Learn more about how we use and vet external sources as part of oureditorial standards.

  1. Social Security Administration

    (SSA). "

    Facts

    ." Accessed November 03, 2022.

Author

Andrew Hurst is a senior editor and a licensed auto insurance expert at Policygenius. His work has also been featured in The New York Times, The Wall Street Journal, Forbes, USA Today, NPR, Mic, Insurance Business Magazine, ValuePenguin, and Property Casualty 360.

Editor

Anna Swartz is a senior managing editor and auto insurance expert at Policygenius, where she oversees our car insurance coverage. Previously, she was a senior staff writer at Mic.com, as well as an associate writer at The Dodo.

Expert reviewer

Maria Filindras is a financial advisor, a licensed Life & Health insurance agent in California, and a member of the Financial Review Council at Policygenius.

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