Is Disability Insurance Worth It?

Melissa is a mother of 2, lives in Utah, and writes for a multitude of sites. She is currently the EIC of HarcourtHealth.com and writes about health, wellness, and business topics.

It seems there are dozens of types of insurance policies to get, and all of them claim to be necessary or valuable. You’re required to have auto insurance if you drive a vehicle, and you should intuitively know that health insurance is a practical necessity.

But other types of insurance are harder to understand, and may not be as intuitively valuable-like disability insurance. So is disability insurance worth the money you’ll pay to have it?

What Is Disability Insurance?

Disability insurance comes in many different forms, but here’s the basic idea: a disability insurance policy will compensate the beneficiary for earned income lost as a result of a disability that prevents the worker from completing their normal work. For example, if a person makes $50,000 a year on a factory floor, but suffers a physical injury that prevents them from being able to perform their normal duties, disability insurance would kick in to cover some or all of that salary.

Disability insurance policies do vary greatly, so it’s important to get your policy checked out by a professional. Most policies provide some combination of paid sick leave, short-term disability benefits (STD) and long-term disability benefits (LTD), which kick in at different times, depending on the severity and length of the disabling incident.

What Are the Odds of Being Disabled?

Being disabled is a life-changing event. You may face steep medical costs, even with health insurance, and ongoing costs of rehabilitation and care. This can quickly exhaust even significant personal savings, and make it hard to manage daily expenses.

Then, you have to consider the fact that you’re going to be out of work. Your steady salary may no longer be accessible to you, and you may not be able to find a job that you can do quickly or easily. That means you’ll have zero income and mounting expenses-which makes disability insurance all but a practical necessity if and when you become disabled.

Nobody can predict being disabled, so the question then becomes, what are your odds of becoming disabled?

There is some significant disagreement on this issue. Some experts argue that the majority of people will face some kind of limiting disability, even if temporarily, at some point in their working life. Others argue the odds of becoming disabled are lower, closer to one in four. But you should know the causes of disability are numerous and diverse-you can be disabled after being in a car crash, after dealing with a genetic cardiovascular disease, after developing cancer, or any number of other illnesses, injuries, and ailments. And while some sources of disability are preventable or possible to mitigate with proper health practices and attention to personal safety, many of them are completely unpreventable and unpredictable-which means anybody could face the possibility of being without work in the future.

Employer Insurance vs. Personal Insurance

You should also ask to see if your employer offers disability insurance benefits to its employees. Many employers with comprehensive insurance packages will include disability insurance, along with health, dental, vision, and life insurance. This isn’t a guarantee, but it’s common enough that it’s worth asking about. Some packages are built in and fully covered, while others require a small employee pay-in. If this option is available to you, you should probably take it, since your disability insurance policy will be either free or heavily discounted.

If your employer doesn’t offer any kind of disability insurance policy, you’ll need to get one of your own through an insurance company. These policies can be a bit more expensive, but are often worth the money. Just make sure you understand the policy, including what it covers and what it doesn’t, before you move forward.

How Much Does It Cost?

Obviously, the cost of your disability insurance policy will vary significantly based on how comprehensive the policy is, who’s helping to pay for it, and your personal risk factors. For example, as you might expect, younger populations tend to pay lower premiums than older populations, and workers in high-risk occupations tend to pay higher premiums than workers in low-risk occupations.

Still, even an older person with a moderate risk profile can expect to pay just a few thousand dollars a year for a solid policy. Considering payouts can cover most of your salary for months, or even years at a time, it’s usually well worth the investment.

Overall, disability insurance is worth it for most employees. Even if your odds of becoming disabled are relatively low, a disability can completely change your life-and be financially devastating when it sets in. Because many employers offer a disability benefits package, and because independent policies aren’t terribly expensive, it’s almost always worth establishing a policy.