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Disability insurance

Disability insurance provides income for you and your family in case your income decreases or even ends altogether due to illness or injury. Although most people don’t want to think about it, the chances of it happening are very real. Did you know that:*

  • According to the United States Census Bureau, 49.7 million Americans were classified as disabled in 2000 Census. "Census 2000 Brief," U.S. Bureau of the Census, March 2003
  • Three out of every 10 workers will experience an accident or illness that keeps them out of work for three months or longer. "Disability Insurance: A Missing Piece in the Financial Security Puzzle," America's Health Insurance Plans, 2004 Over 100 million workers do not have private disability income insurance. Council for Disability Awareness Claims Study 2005
  • Half of all personal U.S. bankruptcies, affecting 2 million people annually, were attributable to illness or medical bills. MarketWatch: Illness And Injury As Contributors To Bankruptcy, Health Affairs Web Exclusive, February 2, 2005

*Statistics obtained from

If you do not already have disability insurance, find out if your employer offers it. If they do, it would be wise to enroll it in as soon as possible. If your employer does not provide it or you are self-employed, purchasing an individual policy will provide much need protection
for your family. Again, it is a good idea to purchase your own individual policy in case you change jobs. Disability insurance has many rules so be sure to do your homework when searching for a provider. Along with consulting an insurance agent, keep the following tips in mind:

  1. Check the duration of benefits and look to see how job tenure affects it. If you've been on the job for a short time, coverage may extend only a month or two.
  2. Examine the insurer's definition of disability.
  3. If you have group insurance, don't forget to calculate the tax bite. Employer-paid disability benefits are treated as taxable income if the premiums are paid with pretax dollars, which reduces the payout. Individual policies purchased with after-tax dollars are not.
  4. Check to see if the plan offers a 401(k) or pension contribution.
  5. Understand the differences between group insurance and individual policies, and consider buying an individual policy as a supplement to your job-based one.
  6. Make sure the period of disability for mental and emotional disability is equal to that for physical disability.
  7. If you're young, consider a future increase option on an individual disability policy. If you invest when you’re a healthy age 35, you can ensure a higher replacement rate if you earn more money when you're 40 and your health has declined.

(Tips obtained from