Private disability insurance just means disability insurance you buy for yourself, not through your job or from the government. Private disability insurance replaces your income if an injury or illness keeps you from working, just like other kinds of disability insurance, except you get to choose your policy’s coverage details and you can keep it even if you change jobs.
Private disability insurance costs about 1% to 3% of your annual income, though other personal factors affect what you pay for coverage. If rates are high, we recommend comparing quotes to find the cheapest rates.
What is individual disability insurance?
Disability insurance is basically insurance for your future earnings. It replaces your income if you’re hurt or sick and can’t work — you just file a claim with your disability insurance company and you’ll get regular payments just like you would if you were still working.
You can use your disability benefits just like your regular paycheck, so on anything from rent to mortgage payments to childcare.
Most private disability insurance policies cover many conditions that might keep you out of work, including:
Anxiety and depression
Broken bones
Nerve damage
Complications from pregnancy
Cancer treatment
Injuries from a car accident
How does private disability insurance work?
Private disability insurance, also called individual or personal disability insurance, works like any other kind of disability insurance, the main difference is that you buy the policy yourself and you’re the one with control over it.
That’s what separates private or individual disability insurance from other types, like:
Group disability insurance, which many people get as a work benefit and is often partially or fully paid for by your employer. This is usually short-term coverage and you don’t keep it when you leave your job.
Social Security Disability Insurance (SSDI), which are monthly payments from the government but are generally a lot less than what you’d get from a personal policy
When you get private disability insurance, you have complete control over your policy details, like your benefit amounts (how much you get paid) coverage length (how long the payments last), and your elimination period (the waiting time between your initial illness or injury and when you start getting payments).
Who needs private disability insurance?
If you have dependents you probably need to protect your income with private disability insurance. Otherwise a sudden illness or injury that keeps you from working could have devastating consequences for your family. The same is true if you have debt that you’re working to pay off with your current income, like a mortgage or graduate school loans.
You also need private disability insurance if you have a high-paying, specialized job, like doctor or lawyer. You could lose out on millions in future earnings if you don’t invest in disability insurance.
How much disability insurance do you need?
You need enough disability insurance to replace your income, so you’d want your total benefits to equal about 60% of your current pre-tax salary.
We recommend having a private disability insurance policy during your prime earning years, but you may be able to drop your coverage as you get close to retirement.
What kinds of private disability insurance are there?
You can buy both short-term or long-term private disability insurance, although you may already get short-term coverage through your job
You won’t have to pay taxes on private disability insurance if you purchase coverage with after-tax dollars, while group disability insurance usually comes out of your pre-tax paycheck, meaning you’ll have to pay taxes on any benefits.
→ Read more about how short-term and long-term disability coverage compare
How does private disability insurance work with other coverages?
Private long-term disability insurance can pair well with short-term coverage from your job.
Let’s say you’re in an accident that leaves you unable to work for several years, you can get benefits from your short-term policy for a few months while waiting for your long-term coverage to start. By structuring your coverage this way, you can avoid any long periods without an income.
Private disability insurance also works with Social Security Disability Insurance (SSDI) — in fact, most policies require that you also apply for benefits from SSDI when you file a claim with your private disability insurance. When it’s time to retire, your SSDI benefits will change to Social Security Retirement benefits.
→ Read more about how disability insurance and SSDI work
How to get private disability insurance
You can get private disability insurance by following these steps:
→ Read more about how to get disability insurance
What does private disability insurance cost?
Generally, private disability insurance costs about 1% to 3% of your annual income. That means the more coverage you get, the higher your rates will be, since there’s more to protect. But income isn’t the only thing that affects your rates.
The cost of private disability insurance also depends on personal factors, like your age, health, medical history, job, lifestyle, and policy details like the waiting period and benefit period.
For an accurate estimate of what you’ll pay, quotes from multiple companies that take all of these factors into account.
Frequently asked questions
Is disability insurance really worth it?
It’s worth having disability insurance because it can protect hundreds of thousands of dollars’ or more in income. Without disability insurance, you risk losing any future income and not being able to cover your expenses if you’re suddenly unable to work.
Should you get disability insurance if you have a policy through work?
Yes, a private disability insurance policy can fill in the gaps of the disability insurance you get through work. Unlike an employer-provided plan, you control your coverage amount and how long you can receive benefits.
How long does disability insurance last?
It depends. Some types of disability insurance provide coverage for between 3 and 12 months, while long-term coverage can cover you until retirement age. You’ll choose your policy’s benefit period when you buy coverage.
