A. The advice is - get as much as you can!
Many people have never thought about disability insurance before, we will do a Disability Insurance 101 below.
Who needs disability insurance?
Anyone who works for a living, relies on their paycheck to live, and couldn't cover a six-to-12-month gap in salary with savings should have disability insurance.
What are the main causes of disability?
The chance of disability increases with age, however, the most common ones are due more to illness than injuries. For example, 29% come from musculoskeletal issues (e.g. back pain and arthritis), 15% from cancers, 9% from high blood pressure and heart disease.
How to get disability insurance?
Use the following 3 strategies to get disability insurance -
1. If your employer offers long term disability insurance, take it
About 40 million workers in private sectors have long term coverage through their employer. Many employers pay for these policies, although more and more are asking employees to contribute something. The advice is - get as much as you can!
2. Supplement with private insurance
Even if you have a policy through your employer, there are two good reasons to buy a little more on the private market -
a) Group policies typically replace up to 60% of your pre-disability gross income, not including bonuses. That might not be enough to live on.
b) As you age, you are likely to have more health issues, not fewer. If you lose or leave your job, your employer policy may or may not be portable. Plus, some private policies let you increase your coverage amount without your having to go through another physical.
3. If your employer doesn't offer disability insurance, buy it yourself
However, it's not cheap if you buy disability insurance entiThere is no way to get around it, you need coverage as the chance of disability happens is a lot higher than you think.
You can use a few ways to lower premium, if you want to -
a) Reduce benefit amount. If you can't afford $5,000 a month coverage, reduce it to $2,500 a month.
b) Increase the waiting period. Most long term disability policies start paying after 90 days. But if you have the savings to self-insure for a year, the premium will reduce significantly.
c) Limit your benefit period. Most policies take you up to age 65 or the Social Security full retirement age. However, most disabilities aren't permanent, they last under five years. By reducing the payout period, you can lower the cost.