1 in 3 Are Disabled in Their Working Years
Don't Get Knocked Off Course
You’re far more likely to be disabled than die during your working years.
Disability is common. One out of 10 Americans aged 45-54 reported a disability that limited their ability to work in 2007.* And freak accidents are not to blame. Ordinary ailments – like arthritis, back or spine trouble, and heart problems – disable most Americans.**
Disability can cause you to lose years of income. Most disabilities last less than a year, but one in seven Americans over age 20 can expect to be disabled for more than five years. And you don’t just lose your salary. You lose essential benefits like medical insurance and employer retirement contributions.
* Current Population Survey, 2007
** Learn more at: http://www.cdc.gov/Features/dsAdultDisabilityCauses/
You Already Have Insurance
But It's Rarely Enough
Social Security Disability Insurance provides limited benefits. They:
- Typically cover less than half of your current paycheck.
- But do include Medicare after 24 months of eligibility, or 29 months after becoming disabled – and medical costs are often substantial.
- You could also get Social Security Supplemental Security Income (SSI) if you would have very little income or savings, but your combined SSI and Disability Insurance benefits would top out at $698 a month in 2012.
- Have strict eligibility rules and can take a long time to get.
- Pay benefits only to people with disabilities that last more than 12 months or with a terminal illness.
Some employers provide disability insurance. Make sure you understand:
- How long you’ll need to wait before the insurance begins.
- How much the insurance will pay.
- How long benefits would continue before “capped” by the insurance company.
Do You Need More?
Time to Make a Plan
Don’t forget to get health insurance, and stay insured. Medical costs associated with disability can easily bankrupt you.
For disabilities that lasts 6 months or less (“short-term” disabilities), you might get by if you tighten your belt and draw down your savings. You could also take out a loan if you expect to recover fully and get back to work. You could also look into a short-term disability policy, which can start paying benefits within 30 days of a disability.
For disabilities that last more than 6 months (“long-term disabilities”), you likely need insurance that would replace a portion of your paycheck until you return to work.
Make a plan to handle both short and long-term disabilities:
The Recommended Protection
Cover 60% to 70% Of Pay, Adjust to Fit Your Situation
Experts recommend a long-term disability policy that covers 60% of your before-tax pay for at least three years as well as enough in savings or a short-term disability policy that covers 70% of pay for six months.
You’ll need less if:
- Your spouse works.
- You’re close to retirement.
- You are a “saver” with a comfortable financial cushion.
You’ll need more if:
- You’re the only earner in your household.
- You tend to spend everything you earn, and have trouble making ends meet.
- You have children.
- You have significant debt, or plan to take on significant debt.
To get a better idea of how much income you’d need, use our super quick budget tool.
The Fine Print
Understand What's Covered
- Age matters: young workers are advised to get at least five years of coverage, and ideally coverage until retirement.
- Decide whether you need insurance with a short waiting period, which is more expensive: 30 days vs. 60 days for a short-term policy; 3 months vs. 6 months for a long-term policy.
- Decide whether you need insurance that covers disabilities that prevent you from working in any job, which is more expensive than insurance that only covers disabilities that prevent you from working in your current job.
- Check if you can continue your coverage for the same premium if you switch employers or occupations.