If you couldn’t work for 6 months due to illness or injury, could you pay your bills? For most Americans, the answer is no. Yet disability insurance — which replaces your income if you can’t work — remains one of the most neglected forms of coverage.
The statistics are sobering. One in four working adults will experience a disability lasting 90+ days before age 65. The average long-term disability claim lasts 34.6 months. Without coverage, most families exhaust their savings within 3-6 months.
Short-Term vs. Long-Term Disability Insurance
Short-term disability (STD) covers the first 3-6 months of a disability, typically replacing 60-70% of your income. Many employers offer STD as a benefit. If yours doesn’t, individual policies cost $25-$75 per month.
Long-term disability (LTD) kicks in after the short-term period ends and can last for years or until retirement age. LTD policies replace 50-70% of income and cost $50-$150 per month for individual coverage, depending on your age, occupation, health, and income level.
Best Disability Insurance Companies
Guardian — Best Overall Policy Features
Guardian offers the most comprehensive disability policies with own-occupation coverage, cost-of-living adjustments, and future increase options. Own-occupation means you’re considered disabled if you can’t perform your specific job, even if you could technically do other work. This distinction is critical for specialized professionals.
MassMutual — Best for Customization
MassMutual allows extensive policy customization with riders for student loan protection, retirement contribution replacement, and catastrophic disability. Their policies are non-cancelable and guaranteed renewable, meaning premiums can never increase.
Principal — Best Value
Principal offers competitive disability rates with solid coverage terms. Their policies include a strong own-occupation definition and optional riders at reasonable costs. For budget-conscious buyers who still want quality coverage, Principal represents the best value.
How to Calculate Your Coverage Need
Your disability insurance should cover your essential monthly expenses: housing, utilities, food, insurance premiums, debt payments, and basic transportation. Subtract any employer-provided disability coverage and any other income sources like a spouse’s salary.
Most financial planners recommend insuring 60-70% of your gross income. Disability benefits from individual policies are typically tax-free if you pay premiums with after-tax dollars, so 60% of gross income often approximates your take-home pay.