Understanding Disability Insurance: Protecting Your Greatest Asset

Most people insure their homes and cars without hesitation, yet many overlook insuring their most valuable asset: their ability to earn an income.

The Statistics are Sobering

According to the Social Security Administration, more than one in four 20-year-olds will experience a disability before reaching retirement age. Yet many people lack adequate disability insurance coverage.

Types of Disability Coverage

Short-term disability typically covers 3-6 months of income replacement, while long-term disability can provide benefits until retirement age. Understanding the difference between "own occupation" and "any occupation" definitions is crucial when evaluating policies.

How Much Coverage Do You Need?

Most disability policies replace 60-70% of your gross income. This percentage typically provides adequate income replacement when you consider that disability benefits are often tax-free if you pay premiums with after-tax dollars.

Employer Coverage May Not Be Enough

While employer-provided disability insurance is valuable, it often has limitations. Consider supplementing with an individual policy that you can take with you if you change jobs and that offers more comprehensive coverage.