Do I Need Long-Term Disability Insurance?


According to the Social Security Administration, studies show that a 20-year-old has a 3 in 10 chance of becoming disabled before reaching age 65. If you suffer a disabling illness or injury, you may have problems paying your bills, and you probably will not have any money to pay living expenses unless you have amassed a large amount of savings. The decision as to whether to purchase long-term disability insurance is an important one.

Types of Policies

Long-term disability coverage is sold either as group coverage or an individual policy. Group insurance through your employer is likely to be the least expensive type of coverage, because many people purchase the policy and share the risk together. You can purchase individual coverage if group coverage is not available through your employer, or if you wish to supplement your employer's coverage. You should consult with a disability insurance professional before purchasing a policy; disability insurance is complicated, and you need to be sure that you have the right type of coverage.

How Much Coverage?

Most long-term disability insurance policies replace between 50 to 80 percent of your income. Generally speaking, you cannot find a long-term disability policy that covers the replacement of 100 percent of your income, because such a policy may not provide an incentive for you to go back to work. More coverage is better, and if you can afford it, you may wish to purchase an individual policy to supplement a policy at work, to increase your coverage closer to the 80 percent mark.


Group policies that your employer provides are often fully paid for by your employer, or you may have to pay a minimal premium that is deducted from your paycheck. Employer policies usually cover you regardless of health concerns and do not require a physical exam. Individual policies use risk-based pricing. If you are in poor health or have occupations or hobbies that are more likely to cause a disability, your policy will be more expensive than if you pose less risk to the insurance company. The cost of individual coverage will vary. According to Stacey Bradford writing for SmartMoney in 2008, a MetLife policy for a 40-year-old non-smoking male business executive would cost $1,150 annually for $3,500 per month in benefits up to age 65 with waiting period of a 90 days.

Social Security

Working Americans already have some sources of disability coverage. Social Security disability pays out a monthly benefit to "insured" people who have worked enough quarters to qualify for benefits and have suffered a permanent disability, that is, a disability that is expected to last longer than one year or result in death. It can be very difficult to qualify for Social Security disability, with many applicants being denied the first time around. Supplemental Security Income (SSI) is a disability program provided by the government based on your financial needs and lack of resources.

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