Disability Coverage for the Unexpected

Disability insurance is good insurance for you to have if you have a family or if you own a house or a car for which you are still making payments.  You work hard to take care of your responsibilities, but what if you were to get injured so that you cannot work?  How long could you go without working and still make your house or car payment while living in an expensive city like Seattle?

With disability insurance, you would not have to worry about your income if you are unable to work due to a serious injury or long-term illness.  If you become unable to work because of an accident or illness, you will receive benefits from your insurance company of 50-70% of your income.  Most policies pay 60% of your income.

While this might not seem to be a helpful amount, if you have paid premiums on your insurance, even through an employer, you do not have to pay taxes on the benefit.  While this will not add up to the full 100% of your income, you can expect it to add up to at least 80-85% of your income, which will at least cover your most important obligations in Seattle while you are disabled.  

It is difficult to find disability insurance that pays benefits of higher than 70% of your income because insurance companies want you to have incentive to return to work, but most people find that 60-70% of their income is enough when no taxes are deducted from the benefit.  Often, utility companies and other entities to which you make monthly payments will take your situation into consideration and offer you a break in payments during the time that you are disabled.  This also offsets the high cost of living in Seattle during your disability, making up for a small percentage of your lost income.

You can purchase both short term disability and long term disability insurance, either through your employer or from an independent insurance company.  Short term disability covers your income during a recovery period from an injury or illness that lasts for thirty days to six months.  There is usually a waiting period of fifteen to thirty days after the injury or onset of illness before you can claim short term disability.

Long term disability covers illnesses and injuries that keep you from working for more than six months and for as long as the rest of your life.  Most policies require you to exhaust your short term disability before making a claim on your long term disability.

Financial advisors usually advise people to have a policy for both long term and short term disability.

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