When should you drop your disability insurance?


The purpose of disability insurance is to help provide for your income in the event that you get disabled.

Here are some instances when you can safely drop your disability insurance:

  • If you are not the bread winner.

    If someone from your household - a spouse or a child - acts as the breadwinner and is able to pay all the bills. In this case, the family won't need the extra income that you bring to the table.

  • If you have enough savings.

    If you are the breadwinner but already have enough in savings and other income (from dividends and investments), you can feel free to drop your policy. To help determine if you have enough savings, you should ask whether you can pay your monthly bills, hospital bills and bills related to your recovery. Do you have enough to continue paying for your mortgage, as well as car payments and other monthly expenses? You should compute for the expenses over an extended period of time, to prepare for long-term disability.

  • If you have already have paid for your home and other big-ticket properties.

    If you don't need to pay for your mortgage, car payments and so on, you may forego buying disability insurance.

  • When you reach retirement age (usually 65 years old).

    This is the age when most disability insurance policies stop their payments. This is also the time when you start receiving your retirement benefits. Some may say that these benefits are considered an income, thus, you won't need the disability checks anymore. In fact, Social Security disability benefits will automatically be converted into retirement benefits once the beneficiary reaches retirement age.

  • If you think that your Social Security disability benefits are enough.

    If your income is close to the maximum income that you need to earn while receiving Social Security disability benefits (which is currently set at $1,000), then you don't need private disability insurance, your Social Security coverage should be enough. If your income (and your monthly bills!) is high, then you will need to protect the income with disability insurance.

If your current situation does not reflect the instances stated above, then disability insurance (coupled with life insurance) will be one of your valuable possessions and should be maintained, not cancelled.

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