How does disability insurance work?

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Life insurance can provide for families when breadwinners die young, but what if the breadwinner survives but becomes unable to pursue her profession due to illness or injury?  Disability Insurance is a way of ensuring that you will still have an income stream in the event you become disabled.  If your employer provides long-term disability benefits, then you may consider purchasing a short-term policy as a means of covering the gap.  Otherwise, purchasing a long-term disability policy is something you should consider, especially if you are the sole provider for a family or if you rely on certain skills that would be jeopardized by a serious injury or illness.

To determine how much coverage you will need, carefully consider all of your sources of available funds and the limitations of each.

  • Employer: How long will your employer continue to pay you after you stop working, and how much?
  • Savings: How long will your savings last if you have to tap into it as a substitute for your salary or wages?
  • Spouse or Partner: Would your spouse or partner be able to cover household expenses without your income?
  • Social Security: You can begin to collect benefits after the end of the fifth full calendar month of total disability, but only if total disability is expected to persist for 12 months or more.