One of the most disagreeable financial chores I do each year is write a rather large check to pay for my disability insurance. This coverage will pay me income in the event I am unable to work due to accident or illness. Writing the check is like taking medicine: It doesn’t taste good, but it’s necessary.

The reason I do it is simple. I can visualize myself disabled, uninsured, and unable to contribute to my family’s welfare. I’d worry about being a burden on my loved ones. If I had died, at least my life insurance would have helped mitigate the loss of my income.

But being disabled is far more likely to happen. The Health Insurance Association of America, a nonprofit trade group, says that about 30 percent of Americans ages 35 to 65 will suffer a disability lasting at least 90 days sometime during their careers. Yet only 36 percent of all full-time employees are offered long-term disability insurance through their employers, and fewer than 6 million individual policies are in force in the United States, according to the Life Foundation, a nonprofit based in Washington, D.C., that educates people about disability and long-term care insurance.

If you’re fortunate enough to be offered disability insurance through your employer, consider that it might not be enough. Many employees, especially those who are highly compensated, should look at buying disability insurance on their own from a private carrier.

“Most company-issued disability policies only cover 50 to 60 percent of your salary,” says Corey Anderson, a disability consultant with SecuraDI Consultants, LLC, an insurance broker in St. Louis Park. “Plus, most of these plans only cover base salary and not overtime, commissions, bonuses, or stock options. This can be an issue of special concern for highly compensated employees.”

Social Security disability benefits aren’t likely to help much either. “They require an individual to be completely disabled for at least a year with no hope of recovery, and are generally limited to $2,000 per month or less.

Finally, whatever you do receive from Social Security will reduce your employer group-disability insurance benefits,” Anderson says.


We can’t cover all of the factors to weigh when you shop private carriers for disability insurance, but here are some questions to ask yourself—answers in every case will influence your premiums.

>> How much do you want to be paid in benefits each month while you are disabled?

>> How long can you wait before tapping benefits? The longer the waiting period, the lower the premium.

>> Do you want benefits for inability to perform in your specific occupation or in any occupation for which you are qualified? Try to lock in on the broadest possible definition of disability.

>> Do you want benefits for two years? Five years? Or until you’re 65, 67, or for your lifetime?

>> Cost of living adjustment: You’ll pay extra for this feature, but it will increase your benefits over time to help them keep pace with inflation.

>> A “future purchase option” allows you to buy more coverage as your income increases. This is especially good for people just starting their careers.


On average, disability insurance premiums cost 1 to 3 percent of your annual income, Anderson says. Premiums will vary based on your age, gender, health history, occupation, and the specifics of the plan.

Europeans and Australians call disability insurance “income insurance,” which may be a better way to think about it. A 40-year-old who nets $50,000 a year will earn $1.25 million over the 25 years or so until retirement—and that’s assuming his or her income doesn’t grow. That’s an asset worth protecting.