Preferred Consumer | Family Living | Insurance | Disability Insurance

Disability Insurance

Most Americans do not have disability insurance. Disability insurance provides a monthly income if you are unable to work because you became disabled due to an illness or injury.

Consider the following statistics from MetLife:

  • One in 3 working Americans will become disabled for 90 days or more before age 65.
  • The average disability absence is 2 and a half years.
  • More than 80% of working Americans don’t have disability income insurance or aren’t covered adequately.

Do you have enough money to live if you became disabled for two and a half years?

Most employers do offer short term disability insurance and long term disability insurance, but they will usually only cover 50% of your monthly payment and it may be taxed if your employer pays the premiums.

Social Security may also be able to help, but the benefit payment is very small.

When determining how much disability insurance you need, consider all of your bills and obligations. You will need to still pay for certain necessities like housing, utilities, and food if you become disabled.

The two types of disability insurance are:

  • Short term disability: This insurance pays benefits for a disability that is short term or for the early stages of a long term disability. Policies may pay benefits from 2 weeks up to two years.
  • Long term disability: This insurance provides benefits for an extended period of time. Policies may pay benefits up to five years or when the person turns 65.

Disability policies may be noncancelable or guaranteed renewable.
You should purchase enough coverage to replace at least 60% of your net pay. It is ideal if you can afford the extra coverage to replace 80% of your net pay.

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