Equifax

Finance Blog

Do I Need Disability Insurance?

Written by Miranda Marquit on October 2, 2013 in Insurance  |   No comments

Many of us think of the “big four” when it comes to insurance: home, life, health, and auto. These insurance policies are designed to protect you and your family from an expensive financial disaster, whether it’s a hospital stay or your house burning down. What…

insurance, insurance policyMany of us think of the “big four” when it comes to insurance: home, life, health, and auto. These insurance policies are designed to protect you and your family from an expensive financial disaster, whether it’s a hospital stay or your house burning down. What many of us forget to consider, though, is whether or not we also need a disability insurance policy.

What is disability insurance?

Disability insurance protects you in the event that you are unable to work and provide for your family due to an injury or illness, such as a car accident that keeps you in the hospital for months or a year spent battling cancer. There are two main types:

  • Short-term disability insurance is designed for temporary situations. It’s usually limited to payouts for a few months—until you can recover and get back to work.
  • Long-term disability insurance, on the other hand, is designed for those who might need more permanent help. If you are permanently disabled or have a terminal illness, long-term disability will pay out indefinitely in some cases (but not all, so check the policy terms).

Disability insurance covers an illness or injury that keeps you from working as a result of situations that arise that aren’t related to work. (Work injuries are covered by worker’s compensation insurance, which is paid for by an employer.)

It’s important to note that disability insurance is income replacement and is not meant for treatment. Your health insurer should pay for treatment, but it won’t pay to replace your lost income—disability can help with that. Additionally, if someone else causes an accident that puts you in the hospital, that person’s insurance may pay for costs, which can include missed wages.

Should you get disability insurance?

Whether or not you should get disability insurance depends, in large part, on your individual situation and your needs. It often makes sense for the primary breadwinner to have some degree of disability coverage.

However, if you can save up enough money to cover six months’ worth of expenses, you may be able to self-insure with your emergency fund and therefore you might not need short-term disability insurance. You may still want to consider long-term disability, though, just in case something happens that keeps you from returning to work ever again.

Many companies offer disability insurance to employees at a reasonable cost. You can also check with your bank, as some financial institutions offer limited policies fairly inexpensively. You might even qualify for a small amount of coverage at no cost to you.

Keep in mind that policies might only pay out between 50 percent and 75 percent of your salary, so you probably won’t get enough to completely replace your income. However, this can still go a long way in helping you stay solvent during a tough time. Also, pay attention to lifetime payout limits (many were eliminated under the Affordable Care Act in 2012), and check into what you can expect in terms of a waiting period. Some policies require that you are sick or injured for at least 30 days before they begin paying out.

Disability insurance makes sense because it provides peace of mind and offers a backup source of income during times when illness or injury prevents you from working. Check into your options to determine what would work best for you.

Miranda Marquit is a freelance writer and professional blogger specializing in personal finance, family finance and business topics. She writes for several online and offline publications. Miranda is the co-author of Community 101: How to Grow an Online Community, and the writer behind PlantingMoneySeeds.com.

No comments yet


Leave a Comment


Name :


Commenting guidelines

We welcome your interest and participation on this forum, but be aware that comments will be published at Equifax's sole discretion. Please don't use this blog to submit questions or concerns about your Equifax credit report or raise customer service issues. Instead, you should contact Equifax directly for all such matters and any attempts to do so in this forum will be promptly re-directed.

Some other factors to consider when commenting:
  1. Registration and privacy. While no registration is required to visit our forum, participants wishing to post a message must register by creating an account. All personal information provided by forum members incident to registration is governed by our Terms of Use and Privacy Policy.
  2. All comments are anonymous. We'll delete your name, e-mail address, and any other identifying information, including details about your investments.
  3. We can't post or respond to every comment - As much as we'd like to, we can't post every comment, nor can we guarantee that we will respond to each individual message. All questions or comments about your Equifax credit report or similar customer service issues should be handled by contacting Equifax directly.
  4. Don't offer specific legal, tax or financial advice. All of the materials on this Site are for information, education, and noncommercial purposes only and this forum is not intended as a means of expressing views or ideas regarding any specific legal, tax, or investment advice. While offering general rules of thumb is both permitted and encouraged, recommending specific ideas or strategies regarding investments, taxes, and related matters is prohibited.
  5. Credit Repair. This blog is not intended as a venue for the discussion or exchange of ideas regarding credit repair or other strategies intended to assist visitors and community members improve or otherwise modify their credit histories, ratings or scores.
  6. Stay on topic. Your comment should be concise and pertain to the specific post in question.
  7. Be respectful of the community. The use of profanity, offensive language, spam, and personal attacks will not be tolerated and egregious or repeat offenders will be banned from future participation. We encourage disagreement and healthy debate, but please refrain from personal attacks on our WordPresss and contributors.
  8. Finally: Participation in this forum may be terminated by Equifax immediately and without notice for failure to comply with any guidelines or Terms of Use. As such, you should familiarize yourself with all pertinent requirements prior to submitting any response through the blog or otherwise. All opinions expressed in this forum are solely those of the individual submitting the comment, and don't necessarily represent the views of Equifax or its management.

Equifax maintains this interactive forum for education and information purposes in order to allow individuals to share their relevant knowledge and opinions with other members and visitors. We encourage you to participate in discussions about personal finance issues and other topics of interest to this community, but please read our commenting guidelines first. Equifax reserves the right to monitor postings to the forum and comments will be published at our discretion. Do you have questions or comments about your Equifax credit report or customer-service issues regarding an Equifax product? If so, please contact Equifax directly. All opinions and information expressed or shared in blog comments are solely those of the person submitting the comments, and don't necessarily represent the views of Equifax or its management.


Insurance Archive

Stay Informed Sign up for our FREE Equifax email Newsletter