Ever ask yourself, “Do I need disability insurance?”
The ever rising medical costs, lack of savings, and an overall trend of fewer employers offering benefits to workers has created a critical blind spot for many American workers and their families, a lack of adequate disability insurance coverage. This is in part due to various myths and misunderstandings surrounding disability insurance. The reality is that it’s a uniquely useful type of insurance coverage.
Why should you get disability insurance?
Because it might help if you get disabled.
Think you're immune to accidents? According to the Council for Disability Awareness, 20-year-old workers have a 1 in 4 chance of becoming disabled by age 67. Also, 5.6 percent of working Americans will experience a short-term disability (six months or less) due to illness or injury.
Because you can’t rely on workers' compensation alone.
Many people mistakenly think they can reply on worker’s compensation. According to the Council for Disability Awareness, a small fraction of disabilities are covered by workers' compensation insurance, and the benefits are often temporary. Similarly, qualifying for Social Security Disability Insurance (SSDI) can be difficult, and approval can take months.
Because accidents or injuries are not the only cause of becoming disabled.
The leading causes of disability is actually illnesses such as arthritis and other musculoskeletal problems.
Because disability insurance payments might be tax-free.
Disability insurance payments in many cases are tax-free. One exception is when the disability benefit is through your employer. Those disability payments could be taxable depending on whether your employer is paying for the plan with pre-tax or after-tax money.
Because your employer’s coverage might not be enough.
Having group disability insurance through your employer is great. However, group plans vary greatly and may provide limited benefit amounts and limited benefit periods. Because disability benefits are based upon income, you may want to consider an individual policy to maximize your benefits.
Because your Social Security benefit might not be enough.
Social Security does not cover temporary disabilities; it covers permanent medical conditions only. Plus, most states do not offer disability benefits. The average Social Security Disability Insurance (SSDI) benefit payment is only 1,197 per month (SSA Publication 05-10570 Jan. 2018). Is that enough to cover living expenses? For most of us, the answer is likely no.
Because for maximum protection, you might need both short-term and long-term disability insurance.
Many employers offer short term disability either as a stand-alone policy or as part of the earned time off plan of the business. These plans offer limited benefits and limited benefit periods.
As the name implies, a long term disability plan can protect your income for 5 years or to age 67. Long term plans typically offer additional features that provide more comprehensive coverage.
What should you look at in a disability insurance policy?
- The "Disability" definition. Do you have to be unable to perform your regular job or any job? Be sure you understand the definition.
- The onset of benefits. If your savings can cover several months of expenses, reduce monthly premiums with a longer waiting period.
- Are there partial benefits? These can provide you with some income if you can't work full capacity.
- Is there a cost-of-living adjustment (COLA)? Adding a COLA option will increase benefits to keep pace with inflated living expenses.
State Farm® (including State Farm Mutual Automobile Insurance Company and its subsidiaries and affiliates) is not responsible for, and does not endorse or approve, either implicitly or explicitly, the content of any third party sites hyperlinked from this page. State Farm has no discretion to alter, update, or control the content on the hyperlinked, third party site. Access to third party sites is at the user's own risk, is being provided for informational purposes only and is not a solicitation to buy or sell any of the products which may be referenced on such third party sites.