A 50-something friend who suffered from a stroke has mounting medical bills and will probably never be able to work again. Fortunate: She had a disability insurance policy.
Three in 10 Americans now age 35 to 65 will, at some point become too disabled to work for three months or longer. Women are at higher risk than men, so we generally pay more for disability insurance.
Disability litigator, Frank Darras, managing partner at Shernoff, Bidart, Darras & Echeverria, LLP, in Claremont, California, told me that anyone who works and needs her income to get by on should have individual coverage. Do not rely on a policy from your employer -- group coverage generally provides 50% of income, payout periods are quite limited and benefits are often taxable. Look for...
- A policy that covers at least 60% of your income to age 65
- Individual "own occupation" coverage, which pays if you are unable to carry out the important duties of your occupation due to an accident or illness. Without this type of coverage, benefits could be denied if, for instance, a former dentist could work as a waitress.
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Guaranteed renewable non-cancelable policy. Even if you are laid off or quit, your policy stays in force at the same price if you pay the premiums.
Individual disability insurance is not cheap--premiums cost about 1%-3% of your annual income, depending on benefits and your current health. But, it is money well spent.
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