3 reasons why you probably don't have disability insurance (and PS, you need it)

Jennifer Fitzgerald Policygenius


Jennifer Fitzgerald

Jennifer Fitzgerald

CEO and co-founder

Jennifer Fitzgerald is the CEO and co-founder of Policygenius, a leading provider of financial protection, from insurance to wills.

Published May 14, 2013|2 min read

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About 7 in 10 workers don't have any long-term disability insurance. You're probably in that uninsured group. That's because getting disability insurance is about as simple as walking into Mordor (forgive the Lord of the Rings reference; we're just fond of this meme).

And unless you're one of the fortunate few who could manage through an extended period without a paycheck, that's a problem. You probably have health insurance to cover expenses if you get ill - but what if you're so ill that you can't work? That's where long-term disability insurance comes in. It replaces your income if a health problem keeps you from working for an extended period. Sounds reasonable - so why do so few of us have it? We've identified the 3 key reasons:

1) It has a terrible name

The phrase "long-term disability" probably makes you think of some catastrophic accident that leaves you permanently disabled in some way. That's wrong on both counts. About 90% of long-term disability claims are caused by illnesses, not accidents. And "long-term" just means the disability lasts longer than 90 days. In fact, when disabilities last longer than 90 days, most people recover within 2-3 years. With such a misleading name, it's no wonder that most people don't know about this insurance and the benefits it provides. In England and Australia, it's called "income protection," which makes much more sense (hint, hint, insurance companies)

2) You spend too much time thinking about other insurance (when you think about insurance at all)

Car insurance dominates insurance advertising. Health insurance and Obamacare dominate insurance press coverage.That stuff alone probably occupies 100% of the time you spend thinking about insurance at all. And the time spent thinking about insurance is dwarfed by time spent on far more enjoyable activities. Effectively, people spend zero time thinking about this important (and, yes, boring) financial issue.

3) It's hard to get even if you want it

Only about one-third of workers have access to long-term disability insurance through their employer. People in the other two-thirds who want to buy their own disability insurance face a confusing and painstaking process (that one blogger documents here).

Given all this, it's unsurprising that so many working Americans are uninsured against a long-term disability. And that's a problem. Being uninsured for long-term illnesses can cause all sorts of financial hardship, like home foreclosure and bankruptcy. So do yourself a favor and look into long-term disability insurance. Our guide to long-term disability insurance is a great place to start.

Photo: Tambako the Jaguar