A Brief Guide to Disability Policies

A person’s most important asset isn’t their retirement account, car, or house—it’s their ability to earn a living. Disability insurance pays part of a person’s income if they can’t work for a long time due to an injury or illness. Everyone who depends on a weekly paycheck should have such coverage, and they should consider the facts below when deciding on where to obtain coverage.

Why It’s Important to Have Disability Insurance

The likelihood of missing work because of an illness or injury may seem slight, especially for those who are young, healthy, and work desk jobs. However, more than 25% of young workers will be disabled for at least 90 days before they reach retirement age, according to the SSA (Social Security Administration). Many people disregard the risk because of preconceived notions about disability, but diseases such as cancer can lead to a disability claim as well.

Kinds of Disability Coverage

There are a couple of types of coverage to consider: short- and long-term coverage. Both are meant to replace part of a person’s monthly pay up to the policy limit during the disability. Some policies cover extra services, like vocational training, to put the person back into the working world.

Obtaining Disability Coverage

  • At work. Most employers offering disability policies pay part or all of the premium.
  • Purchase it in the workplace. Some companies offer disability coverage as a voluntary perk, which allows employees to purchase it through the employer’s broker at a discounted rate.
  • Through an industry association. Some professional groups offer coverage at a group rate.
  • Individual plans. People can purchase disability coverage directly from the company or through a broker. Individual policies are typically long-term, although some sellers offer short-term coverage.

Who Should Buy a Policy

Anyone who doesn’t have enough coverage at work, or who is self-employed, should consider buying a disability policy. Employer-sponsored coverage only pays a portion of a worker’s base salary, and it’s wise to supplement coverage if the worker’s salary is dependent on commissions or bonuses. Insurers consider other coverage sources when determining how much coverage a person can buy. Typically, a worker can’t replace over 75% or their income from combined disability coverage.