Getting Disability Insurance

November 16th, 2018

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Most of us rely on a steady income without really thinking about what it would mean to lose it. Fortunately there ways to safeguard your finances from such a risk, and having disability insurance can be an important part of the equation.

Why you should consider disability insurance

Let’s face it, most of us assume we’ll never miss work do to illness or injury. So what’s the point of spending your hard earned money on disability insurance? Well, as it turns out, more than one out of four twenty-year-olds can expect to miss at least a year of work before they reach retirement due to a disability. So even though a debilitating injury or illness may seem unlikely now, in reality, things happen, and it’s important to be prepared ahead of time.
Government disability support does exist, in the form of Social Security Disability Insurance (SSDI), but the payments aren’t guaranteed, can take a long time to process, and the amounts are typically small, so it’s not really enough to rely on.

How disability insurance works

Similar to other types of insurance, you pay periodic premiums up front (or your employer pays them for you), and then if something happens and you are not able to work, your insurance will pay you a portion of your monthly income, up to a specified maximum amount. How much it pays will depend on your coverage, but it typically won’t pay out more than 60% to 70% of your income.
There are two basics types of disability insurance; short term disability and long term disability. As the name suggests, short term disability will pay out for a shorter period of time, generally for a few weeks up to a year. Long term disability is intended to last for the duration of the disability, or up to a specified number of years stated in the policy. Policies can also also vary in terms of how long it takes the policy to kick in and start paying you money after you become disabled.

Do you actually need it?

Like many financial questions, there’s no right answer for everyone. It partly depends on your personal situation. If you work in a physically demanding job or a job that requires a specific physical skill, like a surgeon or a musician, it can make a lot of sense to have it, particularly if your profession is injury prone.
Also, if you support others financially, it’s usually a good idea to have at least some disability insurance. The same is true with life insurance.
But, disability insurance can be fairly expensive, especially if you have to buy it outside of work. And for a lot of people, it’s unlikely you’ll become so disabled you won’t be able to work at all, which means it may not be necessary, especially if no one relies on you financially. If that’s the case, you’re probably better off building up an emergency fund of 3 to 6 month’s worth of living expenses in case you can’t work for a period of time.

Where to get it

Through work – Some employers offer it as a benefit, and they’ll pay for all or a portion of it. So check with your employer to see if that’s the case. Other employers may offer it as a voluntary benefit and you’ll need to pay for it, but they will have likely negotiated a much better group rate than you would get on your own.
But even if your employer provides it, you’ll still want to check the coverage – is it short term vs. long term and how much of your income will it replace? You may want to buy additional coverage outside of work. Which brings us to…
On your own – If you don’t have it through your employer, or if the coverage isn’t enough, you can still purchase it on your own. You’ll want to shop around and compare offers because prices and coverage will vary. As we mentioned, certain factors will impact the cost, like whether your policy is long term vs. short term, the amount of income you’re looking to replace, and even the definition of a “disability” in the policy, so you’ll want to check these before buying.
We’ve included a table of several disability insurance providers that are all ranked A+ by the Better Business Bureau, which grades businesses on a scale of A+ to F based on customer feedback. Of course there are other providers out there, so you should definitely feel free to keep searching. You could also consider using a third party site like PolicyGenius which helps you compare various competing insurance offers, including disability insurance.

ProviderBBB RatingFind Insurance
A+Get Started
A+Get Started
A+Get Started
A+Get Started
A+Get Started

The cost of your insurance will vary depending on several factors, but you should expect to pay about 1-3% of your annual income. In general, long term insurance will be more expensive than short term since it will potentially pay out for longer. And the more you want your policy to pay out, the more expensive it will be too.
Certain personal factors can impact the cost of your premiums too, like your age and health, whether or not you smoke, your occupation – basically things that can impact how risky you seem to your insurer.


While disability insurance isn’t necessarily a must-have for everyone, it can be an important part of protecting your finances, especially if you work in a physically demanding job or if someone relies on you financially. However, policies vary, so you’ll want to shop around and find the right one for you before signing up.

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