Is Disability Income Insurance Worth It?

This article originally appeared on the MassMutual blog site

You insure your most valuable assets like your home, your car and your life. Most people would agree that they’re worth protection; however, disability income (DI) insurance is something people tend to be less certain about. They’re not sure if they really need it, or if it’s worth the cost. So, is it? There’s no cut-and-dried answer, but there are some strong arguments to be made in favor of DI.

What are the chances you’ll need it?

When you think about the kind of disability that could keep you from working, usually the first thing that comes to mind is a car accident or other catastrophic injury — in other words, something that could happen, but most likely won’t.

In reality, the most common cause of disability is illness, not accidents or injuries. (Take our disability income insurance quiz)

Arthritis, back pain, neurological problems, and cardiovascular illnesses are all more common than injuries when it comes to disability claims.¹

You might be thinking that there’s always savings. If you have enough

money in the bank to cover your living expenses for more than a month or two, you’re in better shape than the large majority of Americans. If you don’t, you’d need to consider another option. (Calculator: How much DI insurance do I need?)

Also keep in mind that the average disability lasts a lot longer than the one-to-two month range. Most people’s savings would run out long before that.

Can I afford disability insurance?

Disability income insurance helps replace a portion of your income if you are too sick or injured to work. Many people have DI insurance through their employer. Such coverage, however, can fall short in both the amount and type of coverage your household may need. (Related: 6 ways group disability income insurance may fall short)

Individual disability income insurance plans can ensure you have protection that’s right for your circumstances. But when you’re already paying for other kinds of insurance — home, auto, life, etc. — it’s hard to think about buying more. But a good way to frame it is what disability insurance costs versus what the benefit would be if you used it.

Here’s a hypothetical: Say a 30-year-old man, taking home $56,250 a year buys a disability insurance policy that costs him $929 per year. (By comparison he could be spending $985 a year on a daily coffee, assuming an average price of $2.70.)

If he becomes totally disabled, after a 90-day waiting period he could receive $4,050 a month over 12 months, replacing about 86 percent of his pre-disability, after-tax income — and hopefully allowing him to keep up his coffee habit.

There are, of course, some limitations and eligibility requirements for DI. So, in the end, it’s a matter of whether you feel like the benefit you could receive outweighs the cost of premiums and the uncertainty that comes with not having any coverage at all. Costs and benefits vary from policy to policy.

Protecting your most valuable asset

With any luck, you’ll never have to deal with a disability that keeps you from being able to work. But it’s a good idea to have a plan in place, so that if you ever did become disabled you could still cover your expenses and provide for the people who count on you.

To learn more about income protection, visit RealityCheckup.info, which is part of a CDA consumer outreach program to help working adults understand the importance of having alternate sources of income for times when they cannot work due to illness, injury, or pregnancy.

_{1 MedicineNet, “Leading Causes of Disability,” April 20, 2022.}

_{2 Social Security Administration, “The Faces and Facts of Disability/Facts.”}

_{Insurance products issued by Massachusetts Mutual Life Insurance Company (MassMutual) (Springfield, MA 01111-0001) and its subsidiaries, C.M. Life Insurance Company and MML Bay State Life Insurance Company (Enfield, CT 06082).}

_{Policies have exclusions and limitations. For costs and complete details of coverage call your agent or MassMutual at 1-800-272-2216 for a referral to an agent.}

_{The information provided is not written or intended as specific tax or legal advice. MassMutual, its employees and representatives are not authorized to give tax or legal advice. You are encouraged to seek advice from your own tax or legal counsel. Opinions expressed by those interviewed are their own and do not necessarily represent the views of Massachusetts Mutual Life Insurance Company.}