When your budget has razor-thin margins and you’re young, long-term disability insurance might sound like something you don’t need, perhaps something you’ll never need. Hopefully, that’s true, but the data suggest you’d be wise to plan for the possibility. According the the Social Security Administration, one in four workers entering the workforce will become disabled and unable to work before they reach retirement age. If you can’t bring home a paycheck for two weeks, two months, six months, how will you cover your expenses?
Health insurance will cover hospitalization and medical bills, but you need a long-term disability plan to pay your living expenses when you aren’t able to earn a paycheck. Short-term and long-term disability can protect you if you are not able to work for weeks, months, or–worst case scenario–ever again.
Check your employee benefits package. Many employers offer both short- and long-term disability insurance as part of their benefits package. This is the best option for securing affordable disability coverage. If this is an option for you, you can also purchase supplemental or individual coverage to cover any gaps between when the disability occurs and when your employer plan kicks in.
Purchase your own coverage. If your employer doesn’t offer long-term coverage, you can purchase insurance on your own. The details and cost of coverage can vary, anywhere from $100 - 300 /month, and benefit options vary, too. Do your research so that you can find the plan that best meets your individual circumstances.
What to look for. Because plans vary, it’s important to do your homework. When you are looking for quotes, consider:
- What products are offered?
- What are the options for benefits? A policy that guarantees income replacement is optimal. Many policies pay 40% to 70% of your income.
- How quickly does coverage kick in after a disability? Many plans require a three-month waiting period before the coverage kicks in, provide a maximum of three years' worth of coverage, and have significant policy exclusions.
- What is the pricing? The cost of disability insurance is based on many factors, including age, lifestyle, and health. The average cost is 1% to 3% of your annual salary.
- How easy is it to get a quote? This can tell you something about how it might be to file a claim with this company.
- Other questions to ask about the company providing the quote: Is there a strong history of claims satisfaction? Is the company’s coverage trusted? Is the company financially stable?
