If you were to lose your job today due to becoming disabled, how would you replace your income? What would you do to continue to provide for your family? Disability Insurance. Having disability insurance compliments your health insurance and replaces your income in the event you are unable to work.
Just how important is disability insurance? Nearly 40 percent of all people between the ages of 40 and 65 will need long term (90 days or more) disability insurance.
While, many employers provide short-term sick leave to their employees, there are three types of disability insurance:
- Employer-paid disability insurance provides income replacement benefits that typically go up to 60 percent of your salary and can last for up to five years or age 65, or even longer in some cases.
- Individual disability insurance provides limited income replacement under specific circumstances.
- Social Security disability insurance provides income to workers who have disabilities that last a minimum of twelve months.
There are other limited income replacement options available to individuals including: Workers compensation, which provides coverage for qualified disability resulting form work-related injuries or illnesses; Auto insurance polices, which cover long term disabilities if the disability is the result of an auto accident. Long term disability coverage can also be provided to active duty service personnel injured while performing service duty, which is covered under the Department of Veterans Affairs.
To adequately cover yourself and your family in the event you become disabled, you should consider an individual disability insurance policy. With a these policies, you can expect to replace anywhere from 50 to 70 percent of your income. Very often, employer-paid coverage will be less than that; therefore the supplemental income will help. Another key consideration is that employer-paid benefits are taxable, while the individual premiums you pay are not. Rarely will any plan pay 100 percent of your income, as most providers want there to be an incentive for you to return to work.