50%
of Americans couldn't meet expenses after just 1 month without a paycheck.
1 in 4
of today's 20 year-olds will become disabled before they retire.
3 in 10
chance of suffering a disability that keeps you out of work for 90 days or longer.
90%
of disabilities are due to illnesses - not accidents.
Insuring your Most Valuable Asset...You
Your most important asset is not your home, your car, your jewelry or other possessions. It’s your ability to earn a living. Think about it: All of your plans for the future—from buying a home to putting your kids through college to building a retirement nest egg—are based on the assumption you will continue to earn a paycheck until you retire. But what would happen if those paychecks stopped? That’s where disability insurance comes in. It provides an income to you and your family if you are unable to work because of illness or injury.
How Much Do You need?
This simple tool estimates the income needed to sustain your current standard of living should you become disabled and unable to work.
Your Options:
In the event you sustain a disabling injury or illness, there are several sources of disability benefits you might be able to tap into, including from the government and your employer. However, there are limitations on these benefits, and they may not be sufficient to meet your income replacement needs. It makes sense, then, to consider obtaining additional coverage, either through the workplace or on your own.
The most flexible and reliable source of coverage is an individual disability insurance policy that you purchase on your own. A privately owned policy is portable, meaning you won’t have to worry about losing coverage if you change jobs. Generally, most individual plans will pay between 40% and 65% percent of your pre-disability gross salary. When paid with after-tax dollars, benefits are received income tax free.
The main source of disability income protection is provided or sponsored by employers. Many employers, especially larger ones, provide their employees with group insurance coverage. There are two forms: short-term disability (STD), which replaces a significant percentage of your income for about three months in most cases, and long-term disability (LTD), which typically pays 40% to 60% of your base salary (pretax) for longer periods.
Often, employees will be given the option to add to the baseline coverage that their employer provides. Some companies don’t provide disability coverage, but help their employees by giving them the opportunity to purchase coverage on a voluntary basis. With this type of program, employees, rather than the employers, pay the full cost of the coverage. A benefit of purchasing disability coverage at work is that it’s generally easier to qualify for than coverage you purchase on your own. Check with your human resources department or benefits manager to see what coverage and purchase options your company’s plan provides.
The federal government administers a disability insurance program that covers most workers, but qualifying for benefits isn’t easy. According to the Social Security Administration, 65% of applications for Social Security disability benefits were initially denied, and the average monthly payment of current beneficiaries for 2012 was $1,130, which hovers around the poverty line.
If you’re employed and you suffer a disabling illness or injury that is work related, you might be able to count on Workers’ Compensation insurance to replace some of your salary. All states require employers to provide Workers’ Compensation coverage. It typically pays about two-thirds of your pre-disability income. However, according to the National Safety Council, 73% of long-term disabilities are a result of an injury or illness that is not work-related and therefore wouldn’t qualify for Workers’ Compensation.