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Is Disability Income Insurance Worth It?

If someone asked you to name your most valuable asset (besides time and family, of course), what would you say? Your house? 401 (k)? Maybe your vehicle? The truth is that for most people, their most valuable asset is the ability to make money.

If you are 30 years old, you probably have another 35 years of work ahead of you (fingers crossed). You are still in the early stages of your career, so we use an annual income of $ 42,000, which is about 25% less than the median in 2020 of $ 56,310. Even if your salary remains exactly the same between now and age 65, with no increases or promotions, your remaining career income would total $ 1


Canceling your homeowner's insurance policy is unthinkable for most people. Even going without collision insurance on a $ 20,000 car would be a no-brainer for the average person. But for some reason, relatively few disabled people seek income insurance to protect against losing their paychecks to illness or injury, even if that income is potentially worth much more.

In this article:

What about social security and workers' compensation?

Worker's compensation and social security insurance both provide the much-needed coverage for those who qualify, but if you are tempted to rely on them alone for disability if you become ill or injured and unable to work, you may want to reconsider.

Workers 'compensation

Workers' compensation is particularly important for those working in hazardous or physically demanding occupations, but it only covers conditions that are directly work-related. According to the Council for Disability Awareness, the 5.6% of working Americans who experience a short-term disability each year are almost all non-professional. In fact, the most common causes of short-term disability claims are pregnancy, musculoskeletal disorders and indigestion.

Social security insurance

Unlike workers' compensation, social insurance (SSDI) will actually cover disabilities caused by non-work-related illnesses, but that does not mean it is easy to qualify. (The large number of attorneys specializing in SSDI claims can attest to that fact.)

To qualify for Social Security, you must have a disability that is expected to last at least one year or result in death. . The disability must prevent you from performing the work you have done before or any other profession. You must also have worked long enough and recently enough to have the necessary social security work. Among those who qualify, the average monthly SSDI benefit was $ 1,280 as of April 2021.

Having said that, social security can be a viable long-term insurance option for those who are eligible. But SSDI requires a waiting period of five months, so the fastest way is to get benefits at the beginning of the sixth month in most cases. If you do not have the resources to survive for several months without income, you may still want a short-term insurance policy as a supplement to fill the gap before SSDI benefits begin.

Who needs disability insurance? [19659006] Deciding if disability income insurance is worth the cost depends largely on your situation. As we mentioned, while almost everyone who relies on a paycheck to cover their expenses can benefit from coverage, there are some cases that make disability insurance particularly important. These include …

If you are the sole breadwinner

Being the only person in your household who earns a paycheck makes it necessary to protect this income. This is especially true for single parents, as a partner returning to work is not an option. Should you come down with a critical illness or experience a debilitating injury, you want to make sure that you and your family are covered by your individual disability insurance. If your loved ones trust you as the only means of support, you may want to move disability insurance to the top of your financial planning list.

If you own a home

Buying a new home often causes people to apply for life insurance, as the loss of your income can make it difficult or impossible to cover the mortgage. for the surviving partner. This is a good idea, but you may also want to consider adding disability insurance.

You are much more likely to become disabled than to die before you reach retirement age. And while it may be obvious to be sick or injured rather than die, the effects on your family's finances can be just as painful. Your income is gone, but your living expenses continue along with medical bills and prescription drugs in all likelihood. In fact, medical problems have historically accounted for about half of mortgages, according to at least one study.

Having both a disability insurance policy and a life insurance policy can be a good way to ensure that you or your partner can cover the monthly mortgage payment if you become too ill or injured to work, or worse – you die.

If you do not have an emergency fund

Do not have six monthly salaries in your savings account? You're not alone. Nearly two-thirds of Americans say they have lived wage-to-wage since COVID arrived in the States. This article has some great tips to help you start your emergency fund, but as it turned out in 2020, emergencies do not always wait until you are ready for them.

But how does disability insurance work? When you buy a disability insurance, you must choose an abolition period that determines how quickly you will be entitled to benefits if you are ill or injured and unable to work. With short-term disability insurance, the alternatives' elimination period usually ranges from as little as 14 days to as long as 60. (Haven Disability offers a choice between 14, 30 and 60 days.) With a 14-day elimination period, you would be entitled to benefits after only two weeks of disability.

If you choose a shorter elimination period, your monthly premiums will increase slightly, but if your savings are currently weak, you can opt for a short-term insurance policy with a short elimination period. help fill the gap.

If you have a physically demanding job

If you have a physically demanding profession, health insurance is even more necessary than usual. But while health insurance can help cover your medical bills, it will not give you financial security if your paycheck ends. If your profession requires standing, lifting, climbing or any other strenuous activity, you should definitely consider disability insurance. Not only because you are more likely to be injured at work (although there are also), but because a relatively minor illness or injury can make your daily tasks difficult or impossible.

If this is the case for you, it may be a good idea to look at individual disability insurance, including short and long term disability cover.

If you have a lot of debt

It can be difficult to put student loans and credit card payments in your budget even in the best of times. . Losing your income can start a downward spiral of rising debt, late fees and debt collection that can take years to recover from. A recent study showed that 66.5% of all bankruptcies were related to medical problems, including health care bills and time out of work. If you have a significant amount of debt, you will probably want to find an individual insurance policy that can help you cover your most important bills during your benefit period.

How much does disability insurance cost?

It is difficult to assess whether disability insurance is worth the cost without knowing how much disability insurance costs. There are too many factors that go into your monthly premiums to provide an answer that suits everyone, but as a very rough rule of thumb, you can usually expect to pay between 1-3% of your salary for long or short term disability benefits.

You can see some examples of estimates for Haven Disability below, but the fastest and easiest way to find out the cost of your situation is to get a 30-second disability insurance policy.

25 year old female sales manager

Healthy non-smoker, WA

3 month benefit period
(14 day elimination period)
$ 7.25 $ 15.76 28 , $ 53
6 month benefit period
(14 day elimination period)
$ 9.07 $ 21.21 $ 39.42
12 month benefit period
(30 days elimination period)
$ 10.76 $ 26.29 $ 49.58 [19659049] 30-year-old male lawyer

Healthy non-smoker, MA

3 months benefit
(14 day elimination period) [19659038] $ 5.44
$ 10.32 $ 17.65
6 month benefit period
(14 day elimination period)
$ 6.69 $ 14.08 $ 25.17
12 month benefit period
(19659040] Elimination period of 30 days)
$ 7.48 $ 16.44 $ 39.87 [19659060] 35-year-old woman, graphic designer [19659061] Healthy Non-Smoker, NJ

3 Month Benefit Period
(14 Elimination Period For Days)
$ 8.71 $ 20.12 $ 37.23
6 Month Benefit Period
(14 day elimination period)
$ 11.32 $ 27.95 $ 52.89
12 month benefit period
(elimination period of 30 days)
$ 13 , 53 $ 34.52 $ 66.15

40-year-old man, cook

Healthy non-smoker, IL

3 months benefit period
(14 days elimination period) [19659037] $ 8.02
$ 18.07 $ 33.13
6 month benefit period
(14 day elimination period)
10.58 $ $ 25.73 [19659040] $ 48.46
12 Month Benefit Period
(30 Day Elimination Period)
$ 12.26 $ 30.78 $ 58.56

Our Editorial Policy

Haven Life is a customer-centric life insurance agency supported and wholly owned by Massachuse tts Mutual Life Insurance Company (MassMutual). We believe that navigating life insurance decisions, your personal finances and general well-being can be refreshingly easy.

Our editorial policy

Haven Life is a customer-centric life insurance agency that is supported and wholly owned by the Massachusetts Mutual Life Insurance Company (MassMutual). We believe that navigating life insurance decisions, your personal finances and your general well-being can be refreshingly simple.

Our content is created for educational purposes only. Haven Life does not support the companies, products, services or strategies discussed here, but we hope they can make your life a little less difficult if they suit your situation.

Haven Life does not have the right to provide tax, legal or investment advice. This material is not intended to be provided and should not be relied upon for tax, legal or investment advice. Individuals are encouraged to seek advice from their own tax or legal counsel.

Our information

Haven Term is a term Life Insurance Policy (DTC and ICC17DTC in certain states, including NC) issued by Massachusetts Mutual. Life Insurance Company (MassMutual), Springfield, MA 01111-0001 and offered exclusively through Haven Life Insurance Agency, LLC. In NY, Haven Term is DTC-NY 1017. In CA, Haven Term is DTC-CA 042017. Haven Term Simplified is a Simplified Life Insurance Issue (ICC19PCM-SI 0819 in certain states, including NC) issued by C.M. Life Insurance Companies, Enfield, CT 06082. Numbers and functions for insurance forms and riders may vary by state and may not be available in all states. Our agency license number in California is OK71922 and in Arkansas 100139527.

MassMutual is rated by A.M. Best company as A ++ (Superior; top category 15). The rating is from Aril 1, 2020 and may change. MassMutual has received different ratings from other rating companies.

Haven Life Plus (Plus) is the marketing name of the Plus Rider, which is part of the Haven Term policy and offers access to additional services and benefits free of charge or at a discount. The driver is not available in all states and is subject to change at any time. Neither Haven Life nor MassMutual are responsible for the provision of the benefits and services made available under Plus Rider, which are provided by third party providers (partners). For more information about Haven Life Plus, visit: https://havenlife.com/plus.html [195659102] Read our revelations

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