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How much disability income insurance do I need? Should I get disability insurance?

Jan 09, 2012 by Beibei from San Diego, CA in  |  Flag
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The amount needed depends on how much you make, how much you need to live on and other factors.. Yes, you should get disability insurance. First place to look is what is offered through your employer. Take advantage of that and elect the maximum coverage they offer. Find out whether that is a pre or post tax deduction. Then work with a professional to find the "gap" in your income which will dictate how much you need for your own personal policy.

1 Comment   |  Flag   |  Jan 10, 2012 from Boston, MA
Brent

Everything that Julian said previously is spot on with regards to the route that you should take with regards to disability insurance. What you might run into is that your employer may or may not provide group disability insurance depending on its size. Another thing that you need to pay attention to is that there are two types of disability insurance specifically short-term and long-term. Short-term disability insurance goes anywhere from 7 to 90 days depending on the policy that your employer might provide to you. Long-term disability insurance is anything over 90 days to a preset time period within the policy. More then likely, your employer's group policy if provided only has short-term disability insurance and thus you would have to supplement it with an additional short-term disability policy to cover the income "gap" and you would have to purchase a long-term disability insurance policy. When I refer to "gap", disability insurance will only cover to a maximum roughly 60-67% of your post-tax income. You will never make as much as you did by working and this intentional by the insurance companies. But overall, disability insurance, employer and individual, is an underutilized insurance in most instances by individuals. You dont think about it until you need it the most.

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Flag |  Jan 11, 2012 near Waterford, CT

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Adi Benyishay Level 13

The best way to think about this is that you’re trying to replace your net income in the unfortunate case in which you become disabled.

There are two types of disability policies. Short term that covers you up to 6 months, and a long term one that can be until you reach full retirement age

Comment   |  Flag   |  Mar 29, 2013 from Southampton, PA

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Great answers from everybody. Disability insurance is very important to have in place but it is not discussed much. Life insurance is much more common, but you are much more likely to become disabled causing a loss of income which will severely impact your life. Check your employer or any affiliations/groups you may be associated with as getting this insurance through one of these avenues is much cheaper than going out and getting a personal policy on your own.

Comment   |  Flag   |  Mar 01, 2014 from Uniontown, OH

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Everyone has given great answers thus far but there is just one more thing I would like to add. You also have to decide if you want to insure for "full disability" or "full and partial disability." If you are looking to insure against the worst case scenario, you go with full only, which covers catastrophic events that may cause you to never work again. This will keep the coverage relatively low cost.

However, you have to realize that the vast majority (something in the range of 60-70%) of all disabilities are partial disabilities -- meaning you are out of work for an extended period of time but will eventually go back on either a full-time or at least partial basis. Choosing to insure for this will cost more than "full only" but offer more protection for a wide variety of disabling scenarios.

Comment   |  Flag   |  Mar 01, 2014 from Appleton, WI

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