Imagine breaking your wrist. You can't work for three months...
I ask this question at every financial checkup. Most people pause. They look at their bank balance. They think about their rent or mortgage, their car payment, their kid’s tuition. Then they say “I don’t know.”
I had a client – let’s call him Dave – who thought he had it all figured out. He was a union electrician, made good money, had health insurance, life insurance, even an accidental death policy. When I asked about disability, he waved his hand. “I’ve got sick leave,” he said. I asked how much. “Two weeks.” That’s not disability coverage. That’s a long weekend.
Dave was 39. Healthy. Never missed a day of work. He told me “I’m not going to get hurt. I know what I’m doing.”
Seven months later, he was on a ladder, replacing a light fixture. The ladder slipped. He fell twelve feet onto concrete. Shattered his heel, fractured his wrist, tore his rotator cuff. Surgery, pins, physical therapy. He was out of work for nine months. Nine months. His two weeks of sick leave lasted two weeks. After that, he had no income.
His wife worked part-time. They had two kids. They drained their savings. They borrowed from his 401(k). They fell behind on the mortgage. Dave was a proud guy. He hated asking for help. But by month four, they were eating at a food pantry.
If Dave had owned a disability policy before the fall – a simple individual long-term disability policy with a 90-day elimination period and a five-year benefit period – his premium would have been around about $90 a month. He would have received about about 60% of his pre-disability income, tax-free, starting at day 91. That would have been roughly roughly $3,500 a month. Enough to cover the mortgage, groceries, and utilities. He could have healed without financial ruin.
He didn’t have the policy. He didn’t think he needed it.
I don’t want that to be you.
So let me walk you through the Disability Coverage Checker – a tool I built to help you see your real risk.
I ran Dave’s numbers after the fact. His monthly take-home was $5,500. Expenses were $4,200. Savings were $8,000. The checker said he could survive 1.9 months. After that, he would start missing bills. That’s exactly what happened.
Now, the checker also asks if you have any disability coverage through work. Many employers offer short-term disability (STD) and long-term disability (LTD). But these group policies have limitations. They typically cover only 40-about 60% of your income, and the benefits are taxable if the employer pays the premium. Also, they are often “any occupation” after two years – meaning if you can do any job, even a desk job paying half your former salary, they can stop paying. And they are not portable. If you leave your job, coverage ends.
If you have group LTD, you should still consider an individual policy to supplement. The gap calculator will show you the difference between what your group policy would pay and what you actually need.
Someone I worked with – let’s call her Ellen – was a physical therapist. She had group LTD through her hospital employer. The policy covered 50% of her income up to about $5,000 a month, with a 180-day elimination period. That’s six months with no income before benefits start. She had three months of savings. That’s a three-month gap. She bought a small individual policy with a 90-day elimination period to bridge the gap. It cost her $40 a month. She told me “it’s cheap insurance against being broke.”
The Coverage Gap Calculator also flags disability as a major risk.
The truth is, disability is more common than death for working-age adults. According to the Social Security Administration, about one in four workers will experience a disability that keeps them out of work for at least a year before they retire. Think about that. In a room of four coworkers, one of you will be disabled for a year or more. That’s not fear-mongering. That’s math.
Yet most people have no disability insurance. They have life insurance – for when they die – but nothing for when they can’t work. That’s backwards. You’re much more likely to become disabled than to die during your working years.
Let me break down the key features of a good individual disability policy.
Elimination period (waiting period) . This is how long you must be disabled before benefits start. Common options: 30 days, 60 days, 90 days, 180 days, 365 days. Longer waiting period = lower premium. If you have an emergency fund that covers six months, you can choose a 180-day elimination period. If you have little savings, choose 30 or 60 days. The Disability Coverage Checker helps you decide based on your savings.
Benefit period. How long will benefits last? Options: two years, five years, to age 65, or lifetime. To age 65 is typical for professionals. It costs more, but it protects you through your highest-earning years. If you’re in a physically demanding job, consider to age 65. If you have a desk job, five years might be enough.
Benefit amount. Usually 60-70% of your pre-disability income. You can’t insure 100% because then you’d have no incentive to return to work. Most policies cap at about $10,000-15,000 a month. That’s plenty for most people.
Own occupation vs. any occupation. This is critical. Own occupation: you’re considered disabled if you can’t do your specific job, even if you could do another job. Any occupation: you’re only disabled if you can’t do any job you’re reasonably qualified for. Always buy own occupation if you can afford it. It costs about 10-20% more, but it’s worth it. A surgeon who loses fine motor skills could still teach or do admin work – any occupation would deny them. Own occupation would pay.
Partial disability / residual benefit. This pays a portion of the benefit if you can work part-time or at reduced income. Essential for people whose income varies month to month.
Non-cancelable and guaranteed renewable. Non-cancelable means the insurer cannot raise your premium or change your benefits as long as you pay. Guaranteed renewable means they can raise premiums but only for an entire class of policyholders. Non-cancelable is better.
Costs vary wildly by age, health, occupation, and benefit design. A 35-year-old office worker in good health might pay $50-100 a month for a good policy. A 45-year-old construction worker might pay $200-300. But compare that to the risk of losing your entire income for years.
Ellen – the physical therapist – ended up buying a policy with a 90-day elimination period, to age 65, own occupation, with a residual rider. She pays $120 a month. She says “I hope I never need it. But if I do, I won’t lose my house.”
Now, what about Social Security Disability Insurance (SSDI)? You pay into it through FICA taxes. But SSDI is incredibly hard to qualify for. You have to be totally disabled for at least about 12 months, and the approval rate is around about 30-40% for initial applications. The average wait time is about 18 months. And the average benefit is about around $1,500 a month – not enough to live on for most people. Don’t rely on SSDI.
So here’s your step-by-step plan.
First, use the Disability Coverage Checker to calculate your monthly expenses and how long your savings would last.
Second, check what disability coverage you have through work. Get the summary plan description. Write down: benefit amount, elimination period, benefit period, own/any occupation definition, and whether partial disability is covered.
Third, calculate the gap. If your expenses are about $5,000 a month, and your group policy pays $3,000 a month after 180 days, you have a shortfall of around $2,000 a month during the elimination period and potentially after. That’s what you need to cover.
Fourth, get quotes from independent agents who specialize in disability. Major carriers include Guardian, Principal, MassMutual, Ameritas, and The Standard. An independent agent can quote multiple carriers.
Fifth, compare policies. Look for own occupation, to age 65, with residual benefits. Choose an elimination period based on your savings. If you have six months of expenses saved, choose 180 days. If you have two months, choose 60 days.
Sixth, pay the premium with after-tax dollars. Then benefits are tax-free. If your employer pays, benefits are taxable.
Seventh, review your policy every few years. Your income changes. Your health changes. Your family situation changes. Adjust as needed.
Dave – the electrician who fell off the ladder – he eventually recovered. He went back to work after nine months. But he’s still paying off the debt from that period. He told me “I thought insurance was a waste of money. Now I know I was the one being wasteful.”
He bought a disability policy after he returned to work. His premium is higher now because of his injuries. He pays about $180 a month. But he said “I don’t care. I will never go through that again.”
Don’t be Dave. Be Ellen.
P.S. A friend of mine – not a client – is a self‑employed carpenter. He’s been paying $95 a month for disability for ten years. He’s never filed a claim. He told me “it feels like throwing money away every month.” I told him “you’re not throwing it away. You’re buying the ability to sleep at night.” He still complains, but he keeps paying. That’s discipline.
By Marcus
