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Do I need disability insurance?

Should you buy long-term or short-term disability insurance — or both?

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Many people benefit from some type of income protection, whether that’s a private short- or long-term policy or whether the federal government’s disability program fits the bill for you. Each policy helps with specific needs based on your financial footing, and some policies might help you more than others. Weigh the benefits and drawbacks for each to help you make your decision.

Do I need long-term disability insurance?

Many people can benefit from a long-term disability policy, especially if:

  • You’re the breadwinner for your household. If you have family relying on you to provide for them, you’ll want to consider long-term disability coverage.
  • You work a high-risk job. You may want a policy if you have a higher risk for getting injured or sick on the job. For example, roof contractors have a higher risk for injuries.
  • Disability could lead to a drastic career change. Some careers like a doctor require specific skills. If you lose the ability to perform that skill, you might want a policy that provides coverage if you can’t work your normal job. This policy is called an own-occupation policy.
  • You have debt to repay. Basic living needs aside, you may need a backup plan to keep up with loan repayments if a health condition leaves you out of work.
  • Your family would struggle financially without your income. Even if your spouse or partner shoulders the financial responsibility, consider how your family would fare if you couldn’t work long term.

How much long-term disability insurance do I need?

Since disability policies don’t replace 100% of your income, find a policy that pays enough for you to live on comfortably. Most long-term policies pay between 40% and 60% of your income for several years — in some cases, to Social Security retirement age.

To get the right level of coverage, tally your bills and everyday living expenses to figure out the minimum you need. Then, see if you can find coverage that leaves wiggle room in your budget in case a disability extends for several months or years.

Do I need short-term disability insurance?

The deciding factor for short-term disability insurance involves how much you’re able to provide for yourself if you can’t work for several weeks or months. Consider this type of insurance if:

  • You don’t have emergency savings. Short-term disability policies typically pay out benefits for three to six months. You may want a policy if you don’t have enough in savings to cover your needs for that timeframe.
  • You’d rather not use your savings. Consider how long it would take you to replenish your savings if you had a short-term medical emergency. You might want extra peace of mind that you won’t have to touch your savings account.
  • Your family has a history of medical conditions. Short-term policies can cover conditions like joint or back disorders, mental illnesses or even pregnancy complications. If any covered conditions are in your family’s medical history, you might want short-term disability protection.
  • You may get pregnant in the future. While pregnancy shouldn’t be the sole reason for getting this policy, some short-term disability policies pay benefits for pregnancy complications or maternity leave. But, you’ll have to have this coverage before getting pregnant to be covered.
  • You want wide disability coverage. If you have long-term disability insurance, a short-term policy can bridge the gap in income while you’re waiting to qualify for long-term disability payouts. Most short-term disability policies pay benefits within a few weeks of experiencing a disability.

How much short-term disability insurance do I need?

A short-term disability policy replaces between 60% and 80% of your income for several months. Because this policy applies to short-term injuries or illness, you might want enough coverage for at least basic, everyday needs.

Tally your everyday bills and needs, then find a policy that helps you pay those expenses. However, think about any expenses you wouldn’t have if you’re not commuting, or costs that you’d scale back on, like memberships and subscriptions.

Compare disability insurance

Name Product Coverage Amount Benefit period Waiting period Own Occupation Medical exam required Online quote
Policygenius Disability Insurance
$100 to $20,000
2, 5, or 10 years or until age 65 or 67
60 - 365 days
Yes
Depends on provider
Yes
Get matched with one of 15 top life insurance companies to find the best coverage and rates for you.
Breeze
$500 to $20,000
1, 2, 5, or 10 years or until age 65 or 67
30 - 365 days
Yes
No
Yes
This startup offers some of the most riders and benefits backed by an established underwriter.
LeverageRx
$100 to $20,000+
1, 2, 5, or 10 years or until age 65 or 67
30 - 365 days
Yes
Depends on provider
Yes
LeverageRx is a digital lending and insurance marketplace exclusively for medical professionals.
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Compare up to 4 providers

Pros and cons of buying disability insurance

Pros

  • You’ll have an income even if you become disabled. This benefit is the sole purpose for buying disability insurance — to protect you even when you can’t work for medical reasons.
  • You can claim for common health problems. Covered disabilities can include musculoskeletal problems, heart conditions, pregnancy complications or even maternity leave, depending on the policy. The ability to claim for common health issues increases the chance you can use your policy.
  • Disability policies typically don’t cost much. Most premiums cost a small percentage of your income, such as 1% to 3%. If you experience a disability, that cost is a small price to pay for months or years of benefit.

Cons

  • You might not use it. You might not face health issues requiring you to stay out of work. There’s a chance you’re paying for a policy that you won’t use.
  • You have an elimination period. Your health condition has to extend past this waiting period, typically a few weeks for short-term policies or a few months for long-term coverage.
  • The payout might not cover all your expenses. Even though you’re receiving an income, your insurance payout might not cover all your responsibilities, especially if you have debt like student loans.
  • You don’t get 100% back. Because this insurance doesn’t replace all of your income, you might fare better financially by using your skills at a different job. However, the ability to change jobs depends on the type of disability you might have.

Do I need both short- and long-term disability coverage?

Short- and long-term policies can complement each other, helping you receive benefits for a longer period of time. However, buying both policies depends on your financial situation and preferences.

  • Most people benefit from a long-term disability policy since it provides income protection for your family’s main source of income for an extended period of time. However, buying this policy comes with the risk that you’re paying for a benefit you’ll never use.
  • A short-term policy might not benefit you as much if you have a large amount in savings. You could rely on your savings to get through a few months without an income. On the other hand, if you don’t have much in savings, have many debts or simply want extra peace of mind, consider short-term disability insurance.

Should I apply for Social Security Disability?

If you have long-term disability insurance, you still can apply for Social Security Disability Insurance (SSDI) benefits. However, SSDI can take a long time for approval if you qualify, and the benefits from your long-term disability policy will be reduced by the amount you receive from SSDI.

You might want to use both SSDI and your private insurance if your private policy only lasts a few years and you expect your disability to last longer. SSDI has a five-month elimination period that’s based on when your disability began.

If you have a serious or permanent disability, consider applying for SSDI well before your private insurance benefits run out. This allows plenty of time to get approved or look into other options if you don’t qualify.

Bottom line

You might need long-term disability insurance if your family relies on your income and you don’t have other means for income with a long-term disability. And a short-term policy might help if you need quick access to income if you’re out of work for a few weeks or months.

To find the best policy, compare benefits from several private disability insurance companies before making a decision.

Frequently asked questions about choosing disability insurance

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