Most people know the value of having insurance for their health, home and car. But not everyone realizes why disability insurance matters. Disability insurance can protect you financially if injury or illness keeps you from bringing home a paycheck.
It may be hard to think about being unable to work when you're in good health. But the chances that you'll miss work due to a long-term or permanent illness or injury are greater than you may realize. Just
If you're wondering "Do I need disability insurance," let's review some of the common questions that people ask so you can decide if it's right for you.
Why does disability insurance matter?
Many people assume that some other benefit or source of funds will help them in the case of an injury or illness. But those sources can come with substantial downsides:
- Group coverage from a workplace usually covers only a portion of your income, often 60% or less. This can mean your household is scrambling to make do with less than your standard budget.
- Workers' compensation often only covers specific job-related injuries, and Social Security disability benefits can be hard to qualify for because the requirements are different than disability insurance payouts. Both also can take a long time to receive.
- Using your general savings without disability insurance to supply part of the income you're used to having can deplete your backup and long-term resources quickly.
The main features disability insurance offers that other financial resources don't are wide coverage, customizable benefits and portability. Unlike workers' compensation, the illnesses and injuries covered by disability insurance aren't necessarily limited to issues tied to work activities.
Disability insurance also often comes with a variety of riders you can add to personalize your coverage to your needs and goals. And when you have coverage that isn't tied to your employer, you can rest assured you'll be able to access consistent disability benefits even if you're in between jobs.
Who should get disability insurance?
In general, anyone who relies on a steady income to pay for day-to-day living expenses can benefit from disability insurance. For certain workers, disability insurance can be a particularly crucial source of stability. People who tend to benefit from disability insurance the most include:
- Primary breadwinners and significant contributors to a household's income whose income is necessary for ongoing living expenses.
- People whose essential living expenses add up to more than 60% of their income.
- Self-employed workers, who can face challenges in rebuilding gigs and networks after a long time off for illness or injury.
- Parents and other people with dependents who rely on them to maintain an income.
- Workers in risky professions, whether it's physically tough or imposes a mental or emotional strain that can lead to burnout.
- Workers who don't have employer-sponsored policies and need their own disability insurance coverage.
What happens if I don't have disability insurance?
You could be putting your financial stability at risk. Without a paycheck and a backup source of income, you'll have to find ways to cover your financial obligations at a time when you're also managing an illness or injury.
You may have personal savings to draw from, but your
Is my employer group disability insurance coverage enough?
It's common for people to think that disability coverage through their employer is enough. But Steve Sperka, vice president of Solutions Design, Implementation and Support at Thrivent, encourages you to think about two things as you review your financial strategy.
"First, how familiar are you really with the amount of coverage you have from your employer? Most employer plans don't cover your entire salary," Sperka says. "They cover a portion, and that
A key question to consider: If something were to happen to you, would you be comfortable living on 50% or 60% of your salary?
Second, it's important to recognize that coverage from your employer is only connected to that employer, Sperka says.
"If you decide to change employers, you'll likely lose your coverage," he says. "You'll then have to count on the coverage of the next employer or purchase your own. And you can't guarantee your health or that you'd even be eligible to purchase coverage on your own."
Having individual disability insurance puts you in control, Sperka says.
"You can have it at the level you want for you and your family," he says. "And it's portable—it goes with you to the next job."
Typically, you can purchase individual disability insurance that wraps around your current employer plan, covering up to 80% of your total income. And the money from your personal contract likely wouldn't be taxable, Sperka says.
While group coverage from an employer isn't always enough disability insurance, it's wise to dig deeper and learn
Most employer plans don’t cover your entire salary. They cover a portion, and that portion typically will be taxable because your employer is paying the premium.
Is disability insurance expensive?
Disability income insurance may be cheaper than you think. Typically, the average annual premium is 1% to 4% of your adjusted gross income.*
Does Social Security cover disability benefits?
The average monthly Social Security payment to disabled workers, which is determined by your salary and work history, is modest at about
What does disability insurance cover?
Disability insurance covers serious health conditions and long-term illnesses as well as accidental injuries. If something is excluded from coverage, such as preexisting conditions or certain occupations or situations, it will be detailed in your contract.
When you buy a disability insurance policy, you can designate
Will I qualify for disability insurance?
If you're healthy, you'll likely be qualified to purchase disability insurance. However, some preexisting health conditions may impact your ability to get the coverage you want.
While you may be eligible to get disability insurance, several factors can influence what the coverage will cost. You'll still qualify but you may pay more if you're older, have a history of health issues or have a high-risk job.
Get help protecting your income
Disability insurance matters because while few people plan on an illness or injury disrupting their life, they do occur. If you're not prepared with a backup for your income, financial stress can pile on top of health challenges. Most people need disability insurance beyond what an employer offers. Factoring this coverage into your overall financial plan safeguards one of your most valuable assets: your ability to earn an income.
Ready to build your disability insurance coverage to suit your actual needs and goals? Connect with a
