Disability Insurance: Protect Your Paycheck

The story: Nora’s back injury

Nora, a nurse with an injured back, talks with a friend, Lee, about how disability coverage could replace part of a paycheck.

1. Narrator: Nora is a nurse. A back injury means no lifting, and no work, for at least four months.
2. Nora: My savings cover about two months of bills. Then what?
3. Narrator: This is what disability insurance is for. It replaces part of your pay while you can’t work.
4. Lee: Check your benefits at work. Mine starts paying after a waiting period, then covers part of my pay.
5. Narrator: A longer waiting period lowers the price, as long as savings can bridge the wait.
6. Nora: So savings bridge the wait, and the policy covers part of my pay after that. I’ll check my waiting period.

What you’ll learn

1. Your biggest asset

   Over a working life, your paychecks may add up to more than everything else you own. An illness or injury that stops work for months is more common than most people think, and most aren’t from accidents at work.

2. Short-term and long-term

   Short-term disability covers a few weeks to a few months. Long-term disability starts after a waiting period and can pay for years. Both usually replace part of your pay, not all of it. People who work for themselves need to buy their own.

3. Features to compare

   Own-occupation coverage pays if you can’t do your own job. Any-occupation coverage pays only if you can’t do any job. Compare the percent of pay, the waiting period and the benefit period. Benefits from coverage your employer paid for may be taxed.

4. Don’t count on Social Security alone

   Social Security disability has strict rules, and approval can take many months. It covers only serious, long-lasting disabilities. It can help, but most families can’t live on it alone.

Key words

short-term and long-term disability

insurance that replaces part of your pay when you can’t work: short-term for weeks to months, long-term for longer

waiting period

how long you wait after you stop working before benefits start

Also called: elimination period

own-occupation

coverage that pays if you can’t do your own job

benefit period

how long a policy keeps paying

Common questions

I work for myself. What are my options?

Self-employed people buy individual disability policies. Compare the same features: own-occupation, waiting period, percent of pay and benefit period.

What if my job offers extra coverage I can pay for?

Buying it yourself with after-tax pay can mean benefits aren’t taxed later. Compare the price with what it would pay.

Remember this

Insure your paycheck, not just your stuff.

Try it: Find your disability gap

1. Check what disability coverage you have through work, if any.
2. Write down the waiting period and the percent of pay it replaces.
3. Compare that monthly amount with your bare-bones monthly costs.

No account needed: do it on paper, or try it on the sample household in the demo.

Live facts

Numbers that change over time, with when they were last checked and where they come from.

• Social Security disability: who qualifies and how to apply

  Source: SSA.gov(opens in a new tab)