Your ability to earn income is often your greatest financial asset. But an unexpected injury or illness that keeps you from working for an extended period of time can jeopardize this asset.
Without a stable source of income, your best-laid plans — education savings, mortgage payments, retirement goals — can fall like dominos. If you can’t work due to a health issue, long-term disability insurance can provide a source of income.
What is long-term disability insurance?
Long-term disability insurance is there to protect you if you’re unable to work because of an accident, injury or illness. If you’re a small business owner, certain policies may also protect your business and reimburse any covered expenses incurred during your disability. This can help you avoid depleting your emergency fund or retirement savings if something happens.
Who needs disability insurance?
If your ability to work is hampered by a disability and you have dependents, like a spouse or children, you want to make sure you’ll be able to pay for your healthcare and living expenses, as well as maintain your lifestyle and savings goals.
Still, many people tend to forego long-term disability insurance. If you’re relatively young and don’t have a history of health problems, long-term disability insurance might seem unnecessary.
But consider the following:
- One in four adults will become disabled before reaching retirement age.1 While we tend to think of life-altering disabilities like cancer or automobile accidents, issues like chronic illness, back injuries and diabetes can also prevent you from working.
- The average long-term disability claim is almost 3 years.1 Yet only 40% of American adults have enough savings to cover 3 months of living expenses if they’re not earning any income, making long-term disability insurance a crucial safety net.1
How do you qualify for long term disability?
This is where you might have questions. What qualifies as a “disability”? How much does a plan cost? How much income will it provide in case of injury? The answer is: it depends on the plan.
- As the name suggests, short-term disability insurance covers you in the event of a short-term injury or illness — typically 3 to 6 months. This type of coverage is required by employers in some states.
- Long-term disability insurance policies cover longer terms, such as 2, 5 or 10 years. Many mid- or large-size employers offer long-term disability coverage via a group plan like health insurance, but you can get supplemental coverage through an individual plan.
- The government also offers Social Security Disability Insurance, but only to qualified individuals who meet a strict definition of disability and adhere to stringent requirements.
Short-term, long-term, and Social Security Disability Insurance plans