What’s disability insurance and do I need it? 5 things to know

Young woman who understood why she needed disability insurance and is now using the benefits.

If you lost your job, imagine that at least you felt safe and secure at home.

With disability insurance there’s a better chance that the roof over your head would stay there.

But many Americans may not be able to pay their everyday expenses if an illness or injury prevented them from working and they lost their regular income. They might not be able to afford rent or a mortgage.

That’s why individual disability insurance exists.

Here are 5 questions that reveal how disability insurance could help when you need it most:

1. Why do I need individual disability insurance?

Because you’re human. Thinking about it after you’re sick or injured is too late. Maybe you’re thinking about the statistics of traffic accidents, or whether you’re likely to break a bone while crushing the slopes on your snowboard. But the most common reason people can’t work is illness, not injury. Cancer, multiple sclerosis, and other issues are behind 96.5% of missed work.1

2. What does disability insurance cover?

Your lifestyle. Think of all the monthly expenses you take for granted because they’re routinely supported by your income: healthcare costs, daycare, or your mortgage. Disability insurance helps maintain your household and afford the time and mental space to heal as you handle a medical challenge.

3. How much disability insurance do I need?

If you already have group long-term disability (LTD) insurance through work, it’s probably not enough to cover your monthly necessities. Ask your HR rep about this. But most LTD will cover about 60% of your income; that equals significantly less take-home pay after taxes—down to about 40-50% of your income. Supplemental disability insurance could help replace more of your monthly income to keep you solvent and stable. Use Principal’s online disability insurance calculator to find out how much you might need to protect that lifestyle.

Graphic which states that if you make an annual salary of $75,000 long-term disability only covers $30,000 - $37,500 after taxes.

4. How much does disability insurance cost?

Not much—typically 1–3% of what you earn. You can afford it for the price of a daily deli sandwich. Getting an estimate is easy: You’ll answer questions that help describe your health habits, job/income status, other insurance coverage, and medical history.

5. When is the best time to get disability insurance?

Now. Because nobody can predict the future. You can’t foresee when or if a disability will prevent you from working. But here’s a staggering statistic: More than 1 in 4 of today’s 20-year-olds will face disability before they reach traditional retirement age, according to the Social Security Administration.2

Graphic which states that 1 in 4 20-year-olds will face disability before retirement.

Next steps:

1 Calculated with data from the “Annual Statistical Report on the Social Security Disability Insurance Program, 2017.” U.S. Social Security Administration, Office of Retirement and Disability Policy, Office of Research, Evaluation, and Statistics, October 2018.

2 Social Security Administration Fact Sheet, January 2019.

Disability insurance has limitations and exclusions. For costs and coverage details, contact your Principal® representative. OR policy #HH750OR.

Disability insurance from Principal® is issued by Principal Life Insurance Company, Des Moines, IA 50392.

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