Just tips:
During your working years, you are far more likely to become disabled than to die, yet most people have life insurance and no disability coverage. Employer plans typically only replace 40-60% of base salary, and the benefit is often taxable. Price an individual long-term disability policy while you are healthy. Your income is the asset on which everything else depends.
Mathematics is biased. The Social Security Administration estimates that 1 in 4 of today’s 20-year-olds will experience a disability before reaching retirement age. And disease, not injury, drives most long-term claims. Back problems, cancer and heart disease lay off far more workers than accidents.
The plan of the group from work is thinner than it seems. Most group plans calculate only base salary, so bonuses and commissions disappear from the benefit. If your employer pays the premium, the IRS taxes every check you receive. Many plans also change definitions after two years. Benefits then continue only if you cannot work in any occupation, not just your own. And the policy ends the day you quit, along with the wages it was meant to protect.
Closing the gap takes an afternoon. Pull out your summary of benefits and confirm three things: the percentage of the payment your plan replaces, the monthly benefit limit, and whether you or your employer pays the premium. The answers tell you exactly how much income would appear if you couldn’t work the next month.
Then quote an individual long-term disability policy to layer on top. Expect to spend roughly 1% to 3% of your income. Look for a definition of “own occupation” and a benefit period that extends to retirement age. The policy is yours, so it follows you from job to job, no matter who signs your check. Pay the premium with after-tax dollars and any benefits arrive tax-free.
Insurers price disability coverage based on age and health, and the two move in the same direction. The strongest policy you’ll ever qualify for is the one you apply for today.
Make and save more money, spend less time
Sign up for our daily email newsletter
Join over 50k subscribers and get daily money tips delivered to your inbox. No nonsense and completely free – just advice.
No spam, ever. Unsubscribe at any time.
Editorial and Advertiser Disclosure: The editorial content on this website is not provided, commissioned, reviewed, endorsed or otherwise endorsed by any advertiser. Opinions expressed are ours alone, not those of any advertiser. The offers displayed are from companies from which we may receive compensation. However, this compensation does not affect where and how these companies are mentioned on the site. We do not include all companies or all offers available on the market.
Related:
