Understanding Disability Income Insurance

We all hear a lot about protecting our financial futures by staying out of debt, having an emergency fund, and saving for retirement. Disability income insurance, or DII for short, is another important form of protection that many people don’t have and haven’t even heard of. The purpose of this kind of insurance is to provide a safety net if you develop a long-term disability that prevents you from working. DII will pay you 60% to 80% of your salary until age 65 if you are unable to work.

How do you know if you need disability insurance? If you aren’t rich, your significant other isn’t rich, and your parents aren’t rich, purchasing this insurance is a good idea.

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6 Responses to Understanding Disability Income Insurance

  1. Gail says:

    I notice you didn’t mention Short Term disability through your employer. I paid for this while I was working (it was optional) and boy am I glad I did! I became disabled and it kicked in for the first six months. Because there was no taxes deducted, etc. I basically was getting more ‘take-home’ pay than when I was working. And when you are in the midst of falling into a bad chronic illness, expenses pile up with trips and co-pays to doctors, hospital parking, etc. SSD can be hard to get and has a waiting period also, although if you think you are eligible apply ASAP as the process can be long and arduous.

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  4. Amy Fontinelle says:

    Personally, I don’t think that short term disability insurance is necessary if you have health insurance and a solid emergency fund. I am sure that there are some situations (like yours) where it can be helpful, though.

  5. Gail says:

    Well, You would need an extremely healthy ermergency fund to overcome a short-term disability without short-term disability. I believe 6 years ago my policy ran me about $29 a month. When I had to tap the policy, I received $1600 a month (non-taxable) which covered the mortgage, utilities, food, car payment, etc. If we had used an emergency account, that would have been close to $10,000 gone. Unfortunately since I didn’t have a long term policy it was a very tight time until I was approved for Social Security disability. Many disabilities only last for 6 months or less such as broken legs, etc. and a person would never even be eligible for LTD during that period. My company paid for my insurance for that initial 6 months (I doubt if all do), but then I went into COBRA at close to $400 a month not counting co-pays.

    Talking about a good medical insurance policy and a healthy emergency fund is pie in the sky for many people who are struggling to get by. I think having both is great, but having a STD policy is also a welcome and neccesary addition to help keep your family stable during what can be an extremely rough time and help avoid the financial ruin you spoke of in your article. Incidently the Short term policy doesn’t take long at al to kick in, at least mine didn’t.

  6. Melanie says:

    Question:
    I have short term diability through my employer.I was in a auto accident over 1 year ago. The driver that was found at fault and ticketed his company has just setteled prior to my getting approval for spinal surgery , injuries caused from the car accident. His insurance was not enough to cover all the expenses.I filed for short term disability due to having spinal surgery. I recieved a letter stating that I qualify, however they state that since I am recieving money from my auto ins. the shortterm money they will pay will be 25.00 a week. I have recieved no money from my auto insurance,we are still in litigation. Help!

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