What should I consider when acquiring or evaluating disability insurance?

Disability insurance replaces part or most of your job income in the event of disability.

Important matters to consider.

  • All working individuals should have enough disability insurance to replace 60 to 70 percent of their job income. Examine policy provisions carefully to determine the types of disabilities that the policy will and will not cover. Employer-provided disability policies may be unduly restrictive. If so, you may need to supplement them with other group or individual disability insurance.
  • If you need to obtain your own disability coverage, first determine if it is available through any professional groups or associations that you can join. Individually purchased disability insurance policies, while the most comprehensive, are also very expensive. Moreover, the insurance companies that offer individual coverage often restrict the extent and availability of this coverage for members of certain occupations, notably doctors.
  • If your employer provides disability insurance coverage, consider reimbursing the employer for the premium that is paid on your behalf. By doing so, you will be able to receive disability benefits tax-free if you ever need to collect. If the employer has been paying the premium, the disability checks will be taxable.