Disability Insurance is one of those things no one likes to think about or pay premiums for, but that most working professionals need. Notice how I said most? Disability insurance comes in two main flavors, Short Term and Long Term.
Short term disability covers you being out of work for, you guessed it, a short period of time, think a month or two. A common trigger for short term disability is giving birth. So if you’re planning to have a child and your company doesn’t have paid maternity leave (or company paid short term disability) you should look into short term disability during your Open Enrollment period.
Long term disability covers being out of work for an extended period of time. Think getting a heart condition where you can’t work a full 40 hours anymore, or you’re a home builder and you have an accident where you can’t physically be out on the job site anymore. Long term disability will usually pay you about 60% of what you are making now, and is usually tax-free! Policies usually make you wait a certain period of time before you start getting paid (elimination period) and will pay you for a certain period of time (10 years, to age 65, to age 67). All of these different factors change how much the insurance company will charge you in premiums.
No if you are the primary or sole income earner for your house and you don’t have enough saved up to continue your lifestyle, you need to look into disability insurance. BUT, if you don’t need to replace that income source because you have other income streams or enough saved to retire comfortably, paying those premiums probably doesn’t make sense.
If you work for a large employer you probably have the ability to get some disability coverage through your employer. The company provided policies are usually pretty easy to get set up, but the premiums will go up over time. Individual disability policies are where you go straight to the insurance company to get a policy that you can keep regardless of where you work. The premiums are fixed, and give you the option to customize the policy more than what you can typically do through work.
Be sure to compare both options, and there’s nothing wrong with having some Group and some Individual coverage!
This material contains only general descriptions and is not a solicitation to sell any insurance product or security, nor is it intended as any financial or tax advice. For information about specific insurance needs or situations, contact your insurance professional.