What it is
Whether you're a paper pusher or a circus acrobat, disability insurance guarantees you a set monthly income (a percentage of your usual pay) in case a medical condition leaves you unable to perform your work duties.
Who needs it most
Many just-marrieds rely on one or both partners' paychecks to squeak by. If that's the case for you, get disability insurance. People in physically demanding and high-risk careers are also wise to get a policy. Most employers provide some kind of disability insurance coverage, but you should examine your policy's benefit limits to see if you need more than your job's policy offers -- if the payout doesn't cover the bare minimum you need to get by, you'll want to consider supplementing your employer's plan. The most common cause of short-term disability claims is pregnancy (something to think about if you're planning to have kids), but it's also worth noting that one in three people will be disabled for 90 days or more before they turn 65.
How it works
It's a matter of weighing any employer-sponsored policies against others and choosing what will keep you the most covered for as long as possible. Policies have different payouts based on whether you're out due to a short-term disability (say, an injury from which you recover, like a broken leg) or a long-term one. Long-term disability coverage is key -- at your age, if you get knocked out of work, you have decades in front of you that you'll need help funding.
Questions to ask before you choose a policy:
- How much money would you need every month to support yourselves?
- How long would you be able to get by financially without any disability benefits at all?
- What's the payout for short-term disability claims and long-term disability claims?
- Will the policy cover you if you're not able to work in your profession? (Some insurers say if you're healthy enough to do anything for money, you're not eligible for benefits!)
- What do you have to do to renew your benefits? How often would you have to "re-certify" -- each month or each year?
- Are absences due to mental health issues, substance abuse, or preexisting conditions included in the policy?
Average cost:
About 1 to 3 percent of your annual income.
How to get your cost down:
If your savings or spouse can cover it, choose a policy that only kicks in after you've been off the job for six to twelve months rather than the standard one to three. You'll save more on premiums and extend the length of your benefits on the far end.
illustration by Joora Song
by Kristen Finello
7/1/08
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