Disability insurance.
The coverage everyone forgets to buy.
You are roughly three times more likely to be disabled than to die during your working years. Most people are overinsured on life and underinsured on disability. If your household runs on your paycheck, this is the single most important coverage after health insurance.
Employer long-term disability covers about 60% of base salary, taxable, and can stop the moment you can perform any job. White-collar professionals should own an individual own-job LTD policy with a 90-day elimination period and benefits to age 65, targeting 60-70% of total income. Expect to pay 1-3% of income per year. It is expensive. It is also the policy most likely to save you from bankruptcy.
The underappreciated risk
Life insurance gets all the attention because death is dramatic. Disability is far more common. A back injury, a cancer diagnosis that requires months of treatment, a car accident that leaves you unable to type for a year - any of these can take your paycheck away without taking your expenses away.
Your ability to earn is by far your most valuable asset in your 30s and 40s. A 35-year-old earning $120K has roughly $3.6M in future lifetime earnings at a modest 0% real growth. Very few people would leave a $3.6M asset uninsured.
Short-term vs long-term
Two very different products that often get confused.
Bridges the gap between running out of sick leave and LTD kicking in. Usually employer-paid or a cheap employer rider. Can often be self-insured with a solid emergency fund.
This is the one that actually matters. A multi-year disability is what takes people from middle class to bankruptcy. If you have to pick one product to get right, this is it.
If you have a fully funded 3-to-6-month emergency fund, you can usually skip private STD and focus on a strong LTD policy.
Why employer coverage isn't enough
Employer LTD is a fine starting point and better than nothing. It has three common limitations that bite at exactly the wrong moment:
- Only 60% of base salary - bonus, commission, and RSU income often do not count.
- Taxable if the employer pays the premium - your actual take-home hit can be closer to 40-45% of pre-disability income.
- Usually "any-job" after 24 months - the benefit can stop once you can do any job, not just yours.
An individual supplemental policy fixes all three. You pay the premium with after-tax dollars, so the benefits are usually tax-free, and you choose own-job language.
Own-job vs any-job
This is the single most important word in a disability policy. It determines when the insurance company gets to stop paying you.
If you cannot get true own-occ, look for "modified own-occ" language and read carefully. The policy text matters more than the marketing page.
How to buy supplemental disability
Unlike life insurance, disability is not a simple commodity. The contract language, definitions, and riders matter enormously. Use a specialist broker rather than a general agent.
- Top carriers: Guardian, MassMutual, Principal, Ameritas, Standard.
- Typical cost: 1-3% of income per year for a good policy. Higher for surgeons, dentists, and a few other trades.
- Professional association discounts often knock 10-25% off the retail price.
- Lock it in young and healthy. Rates are priced for life, and pre-existing conditions get excluded or cost more.
What it should cover
- Benefit amount: 60-70% of gross income, tax-free. Carriers cap what they'll sell you, which is why you stack employer + individual.
- Elimination period: 90 days is the standard sweet spot. Longer waiting period = lower premium, but requires a solid emergency fund.
- Benefit period: to age 65 (or 67). Shorter periods are cheaper and mostly defeat the purpose.
- Non-cancelable and guaranteed renewable - the insurance company cannot raise your rate or drop you as long as you pay premiums.
- Cost-of-living adjustment rider - worth it for long-tail claims; benefits keep pace with inflation.
- Future purchase option rider - lets you buy more coverage as income grows without new medical underwriting.
Disability insurance is priced to feel expensive and pay rarely. That is the point. The combination of severity and probability is exactly what makes it a rational purchase for anyone who lives on their income.
- Social Security Administration - Disability Benefits - ssa.gov
- Council for Disability Awareness - disabilitycanhappen.org
- Life Happens - Disability insurance basics - lifehappens.org
- Policygenius disability guide - policygenius.com
- White Coat Investor disability insurance reviews - whitecoatinvestor.com
Last updated 2026-04-14. Not financial advice. Do your own research.
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