The biggest gap in many people’s insurance protection is the absence or lack of personal disability income insurance.  Group employer-provided coverage is generally limited and not enough to meet your financial needs.

Even if you are young and healthy, the odds are uncomfortably short that someday you may need such insurance.  Almost half of all people now aged 35 will be incapacitated for three months or longer before they are of retirement age. It’s highly recommended that you do not solely rely on your employer-provided disability insurance.  Buying a disability policy can cost from a few hundred to several thousand dollars a year.

In tailoring your policy, aim to replace 60-70% of your current earnings before taxes.  That should be enough to maintain most of your spending power because disability income benefits are tax-free if you have paid for your own insurance.  Don’t rely on Social Security to replace your lost wages.  As explained in “What You Can Expect from Social Security”, you must be severely disabled to get disability benefits from that source.  Even then you will have to wait up to a year from the onset of the disability for payments to begin.  The average benefit in 2022 was $1350 a month for a family.

To protect yourself against inflation, you can choose to include a rider to your policy that will increase your monthly benefits automatically to help keep up with changes in cost of living, keeping your policy relevant. This rider is strongly recommended for individuals under age 50; however, it will increase your premium by 15-20%. 

The elimination period or the so-called waiting period is the number of days you must be disabled before the policy starts paying.  First, let me mention that generally speaking, everyone should have a minimum of 90 days of cash reserves as an emergency fund.  Assuming this is the case, one must set up their elimination period as 90, 180, or 365 days.  The longer the waiting period, the lower the cost.

Two things you don’t want an insurer to do are to raise your premiums or cancel your coverage.  Any disability contract worth considering should be at least guaranteed renewable; however, the best type of policy is called noncancelable.  It both guarantees renewal and freezes the premium at its original level for as long as you keep the insurance.  Above all, buy a policy that covers your own occupation and protects you in the event that you can’t perform the duties of your specific occupation and provides income benefits even if you are only partially disabled

When purchasing a disability policy, you’re probably best off with coverage that would continue to pay you until the normal social security retirement age (67), but you can save hundreds of dollars a year in premiums by opting for a shorter benefit period to age 65 or a five-year benefit period.

It makes sense to protect your most valuable asset: your ability to earn an income.  If you decide to do so, work with a professional insurance broker who specializes in disability income insurance and can help you secure a policy that is right for you. If you would like additional information, feel free to contact me at