Do I Need to Buy Disability Insurance?
Consumers need to examine their financial obligations and assets to determine whether they need disability insurance. Disability plans replace a portion of workers' incomes for a specified amount of time if they're unable to work due to a serious injury or illness. Workers need to decide whether they could handle paying all their expenses on their own if they became disabled and didn't have disability coverage.
Other People Are Reading
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Disability Statistics
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U.S. adults have a greater chance of becoming temporarily disabled than most may realize. A 2008 "Smart Money" magazine article titled, "Do You Need Disability Insurance?," cites statistics from the American Council of Life Insurers, which indicate that one-third of Americans ranging in age from 35 to 65 are disabled for more than 90 days. Furthermore, the ACLI estimates that one in seven workers are disabled for more than five years, and such long-term disabilities are most often brought on by cancer or other serious illnesses. Therefore, some adults may determine they need disability insurance to replace a portion of their income if they're injured or become seriously ill, especially if their wages are needed to support family members.
Income Replacement
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Workers generally can't count on disability plans to replace more than 80 percent of their incomes. The "Smart Money" article indicates that plans purposely don't replace full incomes because issuers are concerned policyholders would have little incentive to return to work. Still, consider how you would manage to pay your bills if you became disabled and didn't have at least a portion of your income replaced by a disability plan. People who don't have enough savings and other assets that could be used to replace a lost income might need disability insurance to help support themselves if they can't work.
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Social Security
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Some people may decide against buying a disability policy because they intend to rely on Social Security benefits to cover their expenses if they become disabled. Yet a 2010 "Wall Street Journal" article titled, "Just in Case: The Skinny on Buying Disability Insurance," says Social Security covers people who are expected to be unable to work for at least a year or who have terminal illnesses. Furthermore, the Journal reports that Social Security covers only about 40 percent of the income a person made before becoming disabled, and people who earn high incomes usually receive less than 40 percent.
Health Insurance
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Employees who are absent from work for long periods of time due to a disability could eventually lose their jobs. In such cases, the "Wall Street Journal" article notes that some employees would have to start paying for health-insurance coverage that their employers previously supplied. Disabled workers who get Social Security benefits may qualify for Medicare to offset health-care expenses, but the Journal says it would take two years before Medicare benefits would take effect. Therefore, workers should determine if they could cover their health-care costs without disability coverage if they lost their jobs following an injury or illness.
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