Do You Need Supplemental Disability Insurance?

The Social Security Administration says disability will affect about one in four US workers at some time during their working years. Disability mostly impacts workers who perform manual labor. However, research shows that it strikes 10% of white-collar workers. If you cannot perform all or part of your job because you become disabled and your employer provides disability coverage, that coverage will replace some of your lost income. However, for most people, it’s not enough.

Short-term disability insurance begins on day eight of disability and provides coverage for up to six months. However, most employers don’t provide short-term coverage. Long-term coverage begins six months after disability occurs and lasts until age 65.

Your group plan may cover 60% or less of your income. Because disability insurance is taxable, you actually receive even less, maybe as little as 40% of your income. Certain events can affect your group disability coverage, such as changing from full-time to part-time and, of course, changing jobs.

Consider supplementing your employer’s disability insurance with a private disability policy. This could increase your coverage to 70% or 80% of your income. Here are three other benefits of supplementing your disability coverage:

  1. Most employer disability plans have a coverage limit (often two years). You choose how long your private supplement will cover you.
  2. The income from a supplemental disability policy is not tax-deductible.
  3. You may receive Social Security disability payments if you cannot work at all. These payments will reduce your employer disability payments. However, they will not reduce your private disability payments.

Financial experts believe that disability insurance may be the most important insurance coverage because it ensures you can cover basic living costs.

We can help you decide if you need additional short- or long-term disability insurance and help you find the right policy for your needs.