If you’re young, healthy and able to work, is disability insurance necessary to have? The answer is yes! According to the Council on Disability Awareness, just over one in four of today’s 20-year-olds will become disabled before they retire. The Council says these long-term absences from work can be attributed to accidents, but also to back injuries or serious illness. If you’re unable to work, disability insurance can provide income to pay bills and provide for your family at any age.
What qualifies as disabled?
Disabled in this instance means you’ve sustained an injury or medical condition that prevents you from performing your job. For example, you may be sidelined by an injury from an accident or a chronic disease like multiple sclerosis. Even a high-risk pregnancy requiring bed rest would qualify.
Disability insurance types
There are two kinds of disability insurance to consider: short-term and long-term. Here’s what is generally covered under both types of disability insurance.
Short-term disability insurance can help if you have an illness or injury severe enough to keep you out of work beyond your accrued sick or vacation time. Short-term policies are not intended to cover your income loss for a prolonged period. Typically, these policies replace your income for anywhere from 13 weeks to two years. Some policies may require a waiting period of up to four weeks after you’ve filed a disability claim before payments kick in.
Long-term disability insurance can provide benefits to you for many years. That’s why it’s especially important for young people to consider getting this type of coverage. If you are severely injured when you’re 35, for example, and unable to work for years, that’s a long time to go without a source of income to sustain you. The waiting period on a long-term policy is anywhere from one to three months, on average. Long term disability policies can pay out up to age 65, but the average is 34.6 months.
Depending on your situation, you may want to get both types or just one.
Disability insurance only replaces a percentage of your income — potentially up to 60 percent. Some policies will pay if you cannot perform the duties of your current job, which is called “own occupation.” Other policies will pay only if you cannot perform the duties of any available job.
Not only is a portion of your income replaced, disability insurance could also help protect your finances. The risk of not having disability insurance is that you could quickly drain your emergency fund and any other savings you’ve accumulated, while you’re out of work.
Where to get coverage
The most affordable way to get disability coverage is through your employer. Talk to your human resources representative about your options and have the premiums automatically deducted from your paycheck.
If your employer doesn’t offer it, your insurance agent may be able to provide a policy. Policies vary from company to company, so review them carefully. Ask these questions when doing your research:
- What does this insurance company define as disability?
- How are the benefits paid out?
- Is the premium price they’re quoting competitive with other companies or policies?
Don’t let the cost scare you. You may be able to reduce your premiums by extending the waiting period that takes place before you start receiving monthly benefits. The longer you delay taking benefits (90 days instead of 60, for example), the lower your premiums may be. You can also calculate your disability insurance needs to see how a policy might fit your budget.
So, who needs disability insurance? A policy can benefit every working adult, regardless of age. Be sure to talk to your employer or your insurance agent about a disability insurance quote.
The advice provided is for informational purposes only. Contact your insurance representative for additional guidance.