Should You Buy a Disability Policy?

Disability insurance may not be high on your list of priorities. But consider this: According to Social Security Administration statistics, one in four 20-year-olds will become disabled before reaching retirement age. A disability insurance policy is designed to replace a portion of your income if you become ill or injured and can't work.

Current Coverage

Your employer may offer group disability insurance coverage. However, if you leave your employer for any reason or if your employer decides to eliminate this benefit in the future, you would lose your coverage. Benefits under a group policy also may not be as generous as you would want. Buying your own disability policy may provide better coverage, and rates may be lower if you purchase a policy when you’re younger.

Why You Need Disability Coverage

Think about how long you could continue to meet your financial obligations without a steady paycheck. If you have a substantial emergency fund or significant retirement savings, you may be able to withstand not receiving an income for a while. But, if your savings would be quickly depleted, purchasing disability insurance is something to consider, especially if you have a family that depends on your income or if you’re self-employed.

Questions to Ask

Before you purchase a disability policy, make sure you understand what the policy covers and the benefits. You’ll want to ask about:

• The definition of disability. Some policies pay only if you can’t work at any job for which you’re qualified, while others pay if you can’t perform a job in your own occupation;


• The length of time before benefits begin (elimination period);


• How long benefits will continue to be paid. This may be for a specific number of years or until retirement age;


• How much the policy pays.

The Cost of a Policy

Several factors affect the amount you will pay for a disability policy. These include your age, health, gender, occupation, the length of the waiting period, the benefit length, and any extra features you choose, such as annual cost-of-living adjustments. Your insurance professional can help tailor a policy to meet your needs.