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The sun finally comes out and you decide to take a motorcycle ride. When the corner comes up a little too fast, you slip on sand, crash, and break your arm. Your health insurance will cover your medical bills, but you're worried about the weeks of lost income that stretch ahead. Even if you don't own a motorcycle, your chances of becoming disabled are great. In any given year, one out of every eight people will suffer a disability of some kind, from auto accident injuries to common back problems. And if you're single, without anyone else's income to rely on when you can't work, disability can mean financial disaster. Unless you have disability insurance, that is.
What coverage do you have?
If you're working, you may have group disability coverage through your employer. Many employers offer short-term coverage that pays disability benefits for a limited period of time, from a few days or up to a year (sometimes two). Some employers also offer long-term coverage that has a two- to three-month waiting period, but then pays benefits until you are age 65. In either case, if you're lucky, your employer may pay all or part of the premium cost. If you aren't sure exactly what coverage you have, check your employee benefits book or contact your human resources department. If you haven't already enrolled in the disability plan, find out how soon you can get covered. You may also be eligible for disability benefits through Social Security, workers' compensation (only if it's a work-related illness or injury), or another government program. But it's wise not to totally rely on these programs for protection. Each program has its own set of usually strict limitations and restrictions regarding eligibility and benefits paid. If the disability coverage you have doesn't adequately meet your needs, consider buying an individual disability income insurance policy. Because policies come in all shapes and sizes, you can buy coverage tailored to your needs and your budget. Shop around and get quotes from several different insurers. Unlike insurance provided by your employer, benefits paid by an individual policy are received free of income taxes.
What coverage do you need?
Your disability coverage won't replace all of your income, but it should offer sufficient benefits to allow you to maintain your current standard of living, taking into account both your needs and other sources of income available to you. Most group and individual disability policies will replace between 50 and 70 percent of your income when you can't work. That may be enough, when combined with the cash in your emergency fund, to keep you afloat financially until you get back on your feet. Ask your insurance agent to help you determine the level of coverage you should have.
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