What are the pros and cons of disability insurance?


The main question you have to ask would be whether it makes sense for you to get disability insurance based on your specific circumstances. To do that, you have to weigh the advantages and disadvantages of buying disability insurance.

Here are the pros and cons:

Advantages of Disability Insurance

  • You can receive a portion of your latest income in the event that you get disabled. This can help pay for your monthly bills and daily needs. This way you can avoid unwanted situations like foreclosures and the prospect of having to file for bankruptcy in case you are unable to earn an income due to disability.
  • With disability insurance, you are able to have a more complete set of protection for your income. You need to protect your income to make sure that your family can still have your needs even at your death or disability. Disability insurance is also important since one may survive a catastrophic event such as an accident or a serious illness but be left with disability.
  • Disability insurance payments from private sources will not affect what you receive from government-administered compensation plans such as Social Security disability.
  • With disability insurance payments, you can get more money to spend on other needs, such as therapies or medications during your recovery from disability.

Disadvantages of Disability Insurance

  • You have to contend with the waiting period. The waiting period is anything between one month to three months. During this period, you will have to dig in your savings and find other sources to provide for the needs of your household.
  • The disability insurance payments will only pay for a limited number of months twelve to twenty-four months for short term disability insurance and two to five years for long term disability insurance.
  • When you are not the breadwinner and if the other members of your household have enough income to fulfill the needs of the household, then you may not need the disability insurance.
  • If your income is near the Social Security benefit amount, then the benefits from Social Security may be enough to cover your lost income. You may not need to shell out premiums for disability insurance. However, it is important to note that you do have to prove conclusively that you are disabled. Social Security will also have limits on your monthly income, which when exceeded, will result in the reductions (or even cessation) of the benefits.
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