Financial Resources
Do You Need Disability Income Insurance?
Illnesses – not injuries – are the leading cause of long-term absences from work. It may be time to rethink this important coverage.
Apr 13, 2023 | 4 min. read
Short or Long Term Income Support
Disability Income Insurance
Disability Income Insurance
The ability to earn a living is your most valuable asset.
If you became unable to work due to illness or injury, how would you meet financial obligations like mortgage or car payments? Could you continue to pursue financial goals, such as saving for retirement? Even short-term disability can put your assets at risk, depleting your savings and potentially causing you to take on debt. Individual disability income insurance policies can replace up to 50 to 70 percent of your income, tax free.1
What's Covered
Features and options of a disability income policy.
There are two main types of individual disability income policies: short-term disability, with a maximum benefit period of two years; and long-term disability, with a benefit period ranging from a few years to retirement age.
Each policy offers a variety of features and options:
Elimination Period
The time between the date of injury or diagnosis, until you start receiving benefits. The elimination period you choose can affect your premiums.
Residual Benefits
A percentage of benefits are paid based on a percentage of lost income if you aren’t totally disabled (for example, a 50% loss of income would entitle the insured to 50% of their monthly benefit).
Catastrophic Benefits
Additional coverage may be purchased to cover serious disabilities that are likely to increase your living expenses.
Rehabilitation Benefits
A policy may pay expenses for a rehabilitation program to help the disabled person return to work in his or her own occupation.
Cost of Living Adjustment Rider
Increases the monthly disability amount while on claim either at a fixed percentage or tied to increases of the Consumer Price Index.
Future Insurability Options
A future insurability option can allow you to purchase additional coverage as your income increases.
How We Can Help
Integrate paycheck protection into your financial plan.
If disability insurance is not provided by your employer or if your coverage is insufficient, it may be wise to consider adding it to your financial plan. A First Command Financial Advisor can review your existing coverage, and recommend a policy with the features that make the most sense for you and your budget. Talk to a Financial Advisor today.
Common Disability Insurance Questions
Do I really need disability income insurance if I work in an office?
The large majority of disability claims are caused by illness rather than injury4, and statistics show that more than one in four of today's 20-year-olds will become disabled at least once in their lifetimes5.
Won’t Social Security cover me if I become disabled?
Social Security Disability Insurance pays benefits to you and certain members of your family if you are "insured," meaning that you worked long enough and paid Social Security taxes. Supplemental Security Income pays benefits based on financial need. Only individuals who have a disability and meet medical criteria may qualify for benefits under either program.
Can I afford disability income insurance?
Don’t assume that disability insurance is too expensive to fit into your budget. By looking at the value received compared to the cost, disability insurance is actually less expensive than auto or homeowners insurance. For just a few dollars a day, a person can insure millions in tax-free income. Protecting the income of a family’s primary wage earners is an essential consideration in a personal insurance strategy and financial plan.
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Tools & Advice
- The Disability Survey conducted by Kelton Research on behalf of Life Happens, April 2012.
- ssa.gov, The Facts about Social Security’s Disability Program.
- Chances of disability, according the Council for Disability Awareness
- Calculated with data from the "Annual Statistical Report on the Social Security Disability Insurance Program, 2021". U.S. Social Security Administration, Office of Retirement and Disability Policy, Office of Research, Evaluation, and Statistics. Released 10/2022. www.ssa.gov/policy/docs/statcomps/di_asr.
- Social Security Administration, Disability and Death Probability Tables for Insured Workers Born in 1999 https://www.ssa.gov/oact/NOTES/ran6/an2020-6.pdf, Table A.