Disability insurance why do you need it

It pays out a percentage of your regular income so that you can continue to provide for yourself while out of work. You never know when an injury or illness will suddenly strike. What would you do in case you injured your back and were unable to get up out of bed? What if you were diagnosed with cancer or suffered an acute stroke?

Disability insurance provides you with a sense of security and peace of mind, since you know that if anything were to happen you would be taken care of.

Short- and long-term disability insurance are the two main types of insurance available to workers. Each has its own set of advantages and disadvantages and, when you take a number of factors into account such as your health, occupation, and finances, one may be more well-suited for you than the other.

Short-term disability insurance pays out if you are unable to work for a relatively short period of time, typically three months to a year.

Some of the most common reasons for claiming short-term disability insurance include:. Long-term disability insurance comes in handy if you suffer from an injury or illness that puts you out of commission and leaves you unable to work for long periods of time.

How long and how much this type of insurance pays out depends on the policy you get. Some of the most common reasons for claiming long-term disability insurance include:. There are some other important differences between the two policies to note as well.

While both short- and long-term policies include an elimination period, or a certain amount of time that a worker must be disabled for before they begin to pay out, the length of this period differs based on the type of policy you get. Short-term disability insurance policies generally have a brief elimination period. In contrast, long-term disability payments typically have a lengthier elimination period. Filing a claim will require proof of an employment income to replace. Talk to your human resources department about setting it up.

When you look at the numbers, long-term disability insurance really is your best option. Because long-term disability is designed to kick in after short-term disability, there is usually an elimination period of several months. The average time it takes to process a long-term claim is around 90 days. Short-term disability insurance is exactly that: short. Payments only last for a few months to a year. The elimination period is normally around two weeks—so you can get your payout faster than with long-term coverage.

But when it comes to cost, short-term premiums are around the same but usually more expensive than long-term premiums. You can put together your own short-term disability coverage by saving 3—6 months of expenses in an emergency fund! If you get sick or injured and have to take time off work for a few months, your savings can fill in the gaps until you get back on your feet. Other things that affect how much you pay in premiums every month are your age, if you smoke, what you do for a living, and how much money you make.

If you want a policy that covers your job as a chimney sweep specifically, your premium would cost more compared to a policy that covers you at an office job. Your lifestyle. Disability insurance helps maintain your household and afford the time and mental space to heal as you handle a medical challenge. But it may not be enough to cover your monthly necessities, much less your other expenses. Ask your HR rep about this.

Supplemental disability insurance could help replace more of your monthly income to keep you solvent and stable. Smoking will raise the cost of your policy, as will other risky activities such as scuba diving and auto racing. If you have a high-risk occupation, or work in a dangerous environment e. The broader the definition of disability, the higher the premium; own-occupation coverage will cost more than any-occupation coverage. Many riders — such as the cost-of-living adjustment rider that increases your benefit for inflation — will also increase your policy cost.

Other than SSDI, which is paid for as part of your Social Security premiums, there are two basic ways to get a disability insurance policy. You may be able to get disability insurance through a professional association. Either way, group disability insurance can be an excellent choice: Because the company or association is buying for a large group of people, the premium is typically lower than for an individual policy.

An added benefit to getting a policy through your employer is that they may also subsidize a portion of the premiums, further lowering your cost. If the premiums are paid with pre-tax dollars which is common , then any benefit you receive down the road will typically be taxed. If the coverage is paid for by an employer, the benefits will be taxable. This is a policy you purchase for yourself, so you can tailor it to your needs.

As it is paid for with after-tax dollars, the replacement income it provides is also tax-free. This approach lets you take advantage of a low-cost group policy for a portion of your needs, then individualize your protection with a secondary policy. Here are a few of the many scenarios where that can make a lot of sense:. You want to be sure the insurance company will be around to pay a benefit if you need it — which could be years or even decades down the road.