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Disability Insurance

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Although often overlooked, disability insurance protects your most valuable asset – your ability to make money (or earn income). This insurance pays you a percentage of your income when a health issue prevents you from working. 

What are the chances that you will become disabled and won’t be able to work? Complete the following sentence:

As reported by the Council for Disability Awareness, “one in _____ workers will be disabled for ____ years or more during their working careers.” 

  • one in three workers will be disabled for ten years
  • one in eight workers will be disabled for five years
  • one in ten workers will be disabled for three years

The Council for Disability Awareness reports “one in eight workers will be disabled for five years or more during their working careers.” 

So, if you think it can’t happen to your family, think again. Half of all mortgage foreclosures occur because a worker in the family becomes disabled. 

Do I Need Disability Insurance?

The leading cause of disability are disorders of the musculoskeletal system: conditions including arthritis, back pain, herniated or degenerated discs, spine/joint disorders or tendonitis. The Council for Disability Awareness offers a chart based on Social Security Administration data which shows the trends of diagnostic causes of new Social Security Disability Insurance (SSDI) awards. Most of these examples of common disability causes are not covered by workers' compensation.

Your chances of becoming disabled often are influenced by lifestyle choices such as:

  • Smoking
  • Risky activities
  • Substance or alcohol abuse
  • Body weight 

Other hereditary or chronic factors that increase your chances of incurring a disability can include diabetes, hypertension, depression or chronic pain. Diet and exercise modifications, stress and anxiety reduction and avoidance of high-risk activities can help reduce your chances of becoming disabled, but accidents happen. 


Use this online calculator from the Council for Disability Awareness to assess your personal disability quotient (PDQ).

Group Disability Coverage 

Group medical forms

What percentage of private-industry employees do you think have access to employer-sponsored disability coverage? 

  • 15 percent
  • 33 percent
  • 49 percent

According to the Bureau of Labor Statistics (BLS), only 33 percent of workers have access to employer-sponsored disability coverage.

Some employers will provide short-term and long-term disability as part of their benefits package. Group coverage usually is less expensive than individual coverage, but your employer’s plan might not cover everything you need. Here are things to look for as you review your group coverage:

  • Generally, disability coverage is limited to 60 to 70 percent of your gross income. Get as much coverage as you can, possibly supplementing through an individual policy. 
  • Look for the term “own occupation” in the coverage. This means the company will pay benefits as long as you cannot work in your own occupation — not any occupation. For example, if you are an auto mechanic who can’t work due to a wrist injury, you might be able to work a less physically demanding job, but not in your occupation.
  • Review and understand the terms of the coverage. Can your policy be cancelled by your employer or the insurance provider? What limitations exist on paying benefits if you are receiving other benefits (e.g., workers’ compensation)? Are the benefits taxable? 

Individual Disability Coverage

Individual medical formsBecause of limitations on group disability coverage, you may benefit from having your own individual coverage. 

  • Consider coverage for partial or residual disability — a kind of disability where you are able to work, but not to your full capacity.
  • Look for coverage that cannot be cancelled, or a policy that is renewable — possibly with a cost-of-living adjustment. 
  • To cut costs, select a longer elimination period — the time you have to wait between the start of an illness or injury and when you can start earning benefits. Offset this period with your emergency fund.

Short-Term vs. Long-Term Disability Coverage

Your employer may offer short- or long-term disability insurance to provide income if you miss work because of a serious illness or disability. Though less than your full income, this amount helps pay immediate and important bills until you’re back to work full time.

Short-Term Disability Coverage

After you use up any paid sick time, short-term disability (STD) coverage pays a portion of your income for a limited period — sometimes up to a year. 

Long-Term Disability Coverage

Long-term disability (LTD) picks up after you have exhausted your sick leave and your short-term disability. This kind of coverage may last for a specific time or until you reach a certain age. 

It’s important to talk to your human resources department about disability coverage offerings, if any. Your employer may offer a type of group coverage. If they do not, you may want to seek out an individual plan to protect yourself.

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