Do you need disability insurance?

Most of us understand the need for insurance for our health, home and car. But what about insurance if injury or illness would take away your ability to bring home a paycheck?

Disability insurance replaces a portion of your income if you’re unable to work. And it can give you the time you need to recover or make other arrangements.

It may be hard to think about being unable to work when you’re in good health. But the chances that you’ll miss work due to a long-term or permanent illness or injury are greater than you may realize. Just over one in four of today’s 20-year-olds will become disabled before reaching age 67—during their working years. It can be anything from cancer to a car accident. And it doesn’t need to be catastrophic—it could be injuries from falling down the stairs or slipping on the ice in the winter.

We’ll review some of the common questions that people ask about disability insurance.

Simply, you put your financial stability at risk. You’ll have to find a way to cover your financial obligations without a paycheck.

While you may have personal savings to draw on in an emergency, how long would your emergency fund truly last if you needed it? Consider that in addition to your regular expenses, including mortgage payments and credit card bills, you may have medical expenses due to the disability. Those could include physical therapy or even the cost of home modifications for comfort and ease. You could go through your savings in a short amount of time.

It’s common for people to believe their coverage through their employer is enough. But Steve Sperka, vice president of Health Insurance Products at Thrivent, encourages you to think about two things as you review your financial strategy.

“First, how familiar are you really with the amount of coverage you have from your employer? Most employer plans don’t cover your entire salary,” Sperka says. “They cover a portion, and that portion typically will be taxable because your employer is paying the premium.”

A key question to consider: If something were to happen to you, would you be comfortable living on 50% or 60% of your salary?

Second, it’s important to recognize that coverage from your employer is only connected to that employer, Sperka says.

“If you decide to change employers, you’ll likely lose your coverage,” he says. “You’ll then have to count on the coverage of the next employer or purchase your own. And you can’t guarantee your health or that you’d even be eligible to purchase coverage on your own.”

Having individual disability insurance puts you in control, Sperka says.

“You can have it at the level you want for you and your family,” he says. “And it’s portable—it goes with you to the next job.”

Typically, you can purchase individual disability insurance that wraps around your current employer plan, covering up to 75% of your total income. And the money from your personal contract likely wouldn’t be taxable, Sperka says.

Disability income insurance may be cheaper than you think. Typically, the average annual premium is 1% to 4% of your adjusted gross income.*

Social Security disability insurance, also known as SSDI, is a program that can provide benefits to people who meet the definition of disability under the Social Security Act. You must qualify for the benefits, which can be paid to the disabled person and their dependents. Many applications for Social Security disability benefits are denied at first, and it could take up to two or three years to complete an appeal.

The average monthly Social Security payment to disabled workers, which is determined by your salary and work history, is modest at about $1,486.

Disability insurance covers serious health conditions and long-term illnesses as well as accidental injuries. If something is excluded from coverage, such as pre-existing conditions or certain occupations or situations, it will be detailed in your contract.

At the time of purchase of an individual contract, you can designate how long you want benefits paid: 12 months, 24 months, 60 months, 10 years or age 67. You also can determine if you want your contract to pay out a portion of benefits if you’re partially disabled.

• Learn more: Disability insurance: What it covers, exceptions & alternatives

If you are healthy, you would likely be qualified to purchase disability insurance. However, some pre-existing health conditions may impact your ability to qualify.

Want to learn more about disability insurance? Connect with a Thrivent financial advisor to review the protection you have in place and for guidance on your situation.