In the event you’re unable to continue working, disability insurance replaces part of your lost income. This is especially necessary for workers with a family to support, but can also be important for older workers who are counting on their peak earning years to help save for retirement or pay down debts. Without it, many who are suddenly disabled could end up facing bankruptcy and a complete loss of their previous lifestyle.
Many people assume they can count on Social Security in the event of a disability, but they are vastly overestimating the benefits of the program. Social Security disability payments generally are not enough for the average person to make ends meet, and it can actually be incredibly difficult to qualify for benefits. It’s better to have another form of disability insurance to so that you don’t have to rely on Social Security to come through when you need it.
Your employer may offer short-term disability coverage or sick leave for a few weeks or months, but in most cases that’s all you can count on. If your employer does offer a disability insurance plan, be sure to evaluate it carefully. In some cases your payments will be reduced if you collect Social Security or workers’ compensation benefits.
If you contribute to your employer-sponsored disability insurance premiums, your benefits will be taxable in the event you have to draw payments. On the other hand your family.
*Fortune, July 12, 2012