Disability
You insure the house. The paycheck buys the house.
Nearly everyone carries homeowners and auto coverage without a second thought, and leaves the income that pays for both entirely unprotected. For most working people under sixty, the ability to earn is the single largest asset they own — usually by a wide margin.
The math
Run your own number.
Take what you earn in a year and multiply it by the years between now and when you planned to stop working. For someone earning $120,000 at age forty, that is roughly $3 million in future earnings sitting behind the ability to get up and go to work.
Nobody would leave a $3 million asset uninsured on purpose. It happens because income does not look like an asset — there is no deed and no statement — and because most people assume the coverage at work already handles it.
And the risk is not exotic. The claims that actually get paid are ordinary: back injuries and joint problems, cancer, heart conditions, complications from pregnancy, and mental health conditions. Not the dramatic accident people picture when they picture disability.
Group vs. individual
What the coverage at work does and does not do.
Group long-term disability through an employer is a real benefit worth having. It is also routinely assumed to do more than it does.
Group coverage through work
Typically replaces around 60% of base salary, often with a monthly cap that high earners hit well before that percentage. If the employer pays the premium, benefits are generally taxable to you — so the real replacement rate after tax is lower than the headline. Bonus and commission income is frequently excluded, and the coverage ends when the job does.
Individual coverage you own
You own the policy, so it follows you between employers. If you pay the premium with after-tax dollars, benefits are generally received income-tax-free. Definitions, riders, and benefit periods are negotiated at issue and locked in, and the coverage can be layered on top of a group plan to close the gap.
For most people the answer is not one or the other. It is keeping the group coverage and adding an individual policy sized to the gap — the bonus income, the amount above the cap, and the portion taxes take.
What actually matters
The definition matters more than the price.
Two policies with nearly identical premiums can behave completely differently at claim time. This is where the differences live.
How “disabled” is defined
The most important term in the contract. A true own-occupation definition pays if you cannot perform the material duties of your specific occupation — even if you go earn money doing something else. An any-occupation definition may not pay if you are able to work in some other job you are reasonably suited for. Some policies use own-occupation for a period and then switch. For a surgeon, a dentist, or anyone with a specialized skill, this distinction is the entire point of the policy.
Elimination period
How long you wait after becoming disabled before benefits begin — commonly 90 or 180 days. A longer wait lowers the premium, but it has to be survivable from savings, because nothing arrives during it.
Benefit period
How long benefits continue once they start. Two years, five years, or to retirement age. A short benefit period covers a temporary setback; only a to-age-65-or-67 period addresses the outcome that actually ruins a financial plan.
Residual and partial benefits
Most disabilities are not all-or-nothing. A residual rider pays a proportional benefit when you return to work at reduced capacity or reduced income. In practice this rider gets used far more often than the total disability benefit does.
Non-cancelable and guaranteed renewable
Whether the company can change your premium or your terms later. Non-cancelable locks both for the life of the policy. It costs more up front and it removes the risk of a repricing you did not see coming.
Future increase option
The right to buy more coverage later as your income grows, without new medical underwriting. Especially valuable early in a career, when income is about to rise faster than health does.
Business owners
The business has its own exposure.
If you own a practice or a small business, a personal disability policy replaces your income but does nothing for the rent, the payroll, or the loan payment that continue while you are out. Business overhead expense coverage reimburses those fixed operating costs so the doors stay open and there is still a business to come back to.
Where there are partners, a disability buy-out arrangement funds the purchase of a disabled owner’s interest — the same problem a buy-sell agreement solves for death, which is far more commonly funded. Partnerships tend to plan carefully for one and not at all for the other.
Key person coverage addresses the same risk from the other direction: what the business loses when someone other than you is the one who cannot work.
Common questions
Straight answers.
Doesn't Social Security cover this?+
What does my occupation have to do with the price?+
I'm healthy and young. Can I wait?+
How much coverage can I get?+
What should I bring to the first conversation?+
Insurance products are offered through the licensed agent named on this site and the insurance carriers with which the agent is appointed. Product availability, features, and rates vary by state and are subject to underwriting approval. Guarantees are backed by the claims-paying ability of the issuing insurance company. Definitions, riders, exclusions, limitations, and issue limits vary by policy, occupation class, and state. Tax treatment of benefits depends on who pays the premium and with what dollars — confirm your situation with your tax advisor. This page describes how these products generally work and is not a description of any specific policy’s terms.