Disability Insurance: The Coverage Most People Forget
A long-term disability is more likely than premature death — and most workers are underinsured for it.
Why this matters
Roughly a quarter of today's 20-year-olds will experience a disability lasting 90+ days before retirement. Without disability insurance, the lost income often forces depletion of retirement savings or family debt.
Short-term vs long-term
Short-term disability covers a few weeks to several months and is often paid through an employer. Long-term disability picks up after the short-term ends and can pay until retirement age. Long-term is the critical one.
What employer coverage usually misses
Employer policies typically replace 50–60% of base salary, taxable if the premium was employer-paid, capped at a maximum, and end when you leave the job. They're often inadequate for higher earners.
Key definitions to watch
'Own-occupation' coverage pays if you can't perform your specific job. 'Any-occupation' only pays if you can't work at all. The first is more expensive but far better protection for specialised careers.
How much coverage to aim for
Combined coverage (employer + supplemental) replacing 60–80% of pre-tax income is a common target. Premiums you pay yourself produce tax-free benefits — usually worth the cost.
Waiting period and benefit period
Longer waiting periods (90 or 180 days) lower premiums. Longer benefit periods (to age 65) raise premiums. Match the waiting period to your emergency fund and the benefit period to retirement age.
Frequently asked questions
Is it expensive?
Typically 1–3% of annual income for solid coverage. The math heavily favours buying it.
Can I buy it directly?
Yes — independent insurance brokers can compare across carriers. Worth doing if your employer coverage is thin.
Is Social Security disability enough?
No — it's notoriously hard to qualify for and benefits are modest. Plan for private coverage on top.