Disability insurance

Your overall financial strategy should probably include a disability insurance policy. These policies provide income if you become disabled and are unable to work. They "insure" your earning power, and therefore can also protect your credit. Most disabilities arise from a medical condition caused by an accident or some other unforeseen problem. Sometimes, they are associated with aging. It makes sense to be protected.

How much disability insurance do you need?

You should have enough to cover your monthly obligations if you can't work. A monthly budget can help you to determine how much you are currently spending and what your normal monthly expenses are. Policies are offered on a "dollars per month" basis and you usually cannot insure yourself for more than you are currently earning. And of course, the larger the payment you would receive from the policy, the larger the premium you will pay.

Proceeds from a disability policy are generally tax free if you pay the premiums. However, if your employer provides coverage, you will have to pay tax on the benefit payments and may want a higher level to cover the taxes.

Other considerations

Definition of disability - You should examine the policy's definition of disability. Some policies ("own occupation") provide benefits if you cannot perform the work you usually do while others provide benefits only if you cannot perform a job that you are reasonably trained to perform. "Own occupation" policies are usually more expensive and may not be worth the extra premiums if there are other jobs you could perform easily that would provide a similar level of income and that you would find rewarding.

Guaranteed renewable or non-cancelable - These words are important. They both mean that you cannot be dropped because of poor health. However, guaranteed renewable usually does not mean the insurance company cannot raise its rates. Make sure to read the terms of the policy carefully.

Waiting period - This represents the time you must wait after you are disabled and before you can start getting benefits. Many policies offer different waiting periods from 30 days to a year. The shorter the wait, the higher the premium. If you have other assets you could use for living expenses for a period, you may want to consider the longer waiting period with the lower premium.

Getting disability insurance

Most employers offer disability insurance as part of their benefits package. If you are covered by a disability policy through your employer, it is important to make sure that the benefit provided is enough to meet your obligations. If not, you should consider purchasing a supplemental policy.

If you work for a smaller company or are self-employed, you may need to find your own policy. You could also investigate whether any professional organization you belong to offers these types of policies.


Having disability insurance is almost a necessity, especially for younger people, for those without many other assets, and for those with families that are dependent on a breadwinner's income. The good news is that many employers offer disability insurance. Check your employer's benefits program for availability and benefit amount.

We can help

If you'd like help determining the amount of disability coverage that is right for you, visit one of our branches or call us at 1-800-288-3425.

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