An illness or injury that keeps you from working stops your paycheck, and a work disability plan replaces only part of it. Look up what yours pays after its monthly cap and taxes, then price an individual disability policy to cover the gap while you’re young and healthy.
Social Security’s actuaries give a 20-year-old worker a 24% chance of a disability serious enough to qualify for its benefits before age 67, and a 13% chance of dying before then. The likelier of the two leaves you with every bill you have today and no paycheck to pay it.
If you have long-term disability coverage through work, it replaces less than it seems. Group plans commonly pay 60% of your earnings up to a monthly maximum, so the more you earn, the smaller the share they cover.
The details shrink it further. Some plans count only base pay and leave out bonuses and commissions. If your employer pays the premium, the benefit is taxable income. And coverage through work often ends when you leave the job.
Pull the plan summary from your benefits portal or HR and run your own numbers. A plan that pays 60% up to $6,000 a month replaces just 40% of a $180,000 salary, before taxes. If you have no plan at work, the gap is your whole paycheck.
An individual long-term disability policy fills that gap, and since you own it, the coverage moves with you from job to job. Expect to pay roughly 1% to 3% of your salary a year. When you compare quotes, look for these terms.
- An own-occupation definition of disability, which pays when you can’t do your own job rather than only when you can’t do any job
- Noncancelable and guaranteed renewable provisions, so the insurer can’t raise your premium or cancel the policy while you keep paying
- An elimination period, the wait before benefits start, that your emergency fund can carry, since a longer wait lowers the premium
Apply while you’re young and healthy. Premiums climb with age and poorer health, and a condition you already have when you apply can be excluded from the policy.
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