If you’ve heard of popular financial-literacy expert Suze Orman, you might have wondered what she has to say about disability insurance.
Not only does Suze Orman recommend having a policy, she calls disability insurance one of the “vital protections” to have “in case of illness, incapacity, or accidents.”
Five takeaways from Suze Orman’s disability insurance advice
Disability insurance, along with life and health insurance, Medicare and Medigap plans, and long-term care insurance all appear in Orman’s Ultimate Protection Portfolio, a catch-all guide to financial planning.
→ Read answers to frequently asked questions about disability insurance
1. Don’t confuse long-term disability insurance for workers’ comp
Orman emphasizes that disability insurance is not the same as workers’ compensation. Both types of coverage pay you benefits when you’re hurt, but workers’ comp is only good for injuries (and not illnesses) that happen at work — long term disability insurance can cover injuries on the job, at home, or on vacation, as well as illnesses like cancer or depression.
2. Check to see how much your employer-provided plan covers
If you think that you don’t need to worry about disability insurance because you already have a policy through work, think again. “Even the best employer group policies generally replace no more than 60 percent of your salary,” Orman says, and that’s before taxes. Plus, employer-provided disability insurance is often only good for between 3 and 6 months, not indefinitely, so you should also consider getting a long-term disability policy.
3. Go over important policy details before you buy
There are a few details to pay close attention to when you’re shopping for disability insurance.
What percent of your income a policy will cover: Most policies cover between 60% and 90% of your after-tax salary, and more coverage is more expensive.
The length of your policy’s elimination period: The elimination period, which is the waiting period between an illness or injury and when you start getting payments, is typically at least 90 days for long-term disability policies.
How long your benefits will last: The maximum benefit period may be a set amount of time like 1, 2, 5, or 10 years, or until you’re old enough to retire (usually 65 or 67).
Which illnesses your policy covers: Some disability insurance policies exclude certain types of illnesses or mental health conditions from coverage.
What happens if you’re partially disabled: You may be able to get partial or residual benefits if you’re still able to work but your ability to do your job is affected.
Your policy’s definition of disability: Own-occupation coverage means you’ll get benefits as long as you can’t do the job you had when you bought the policy, even if you can get another job. This isn’t the case with any-occupation coverage.
4. Keep your policy details in an easy-to reach location
Orman recommends keeping your policy documents in a convenient place along with other types of insurance records. This can help you refer to them whenever you need. It can also make it easier to make a claim if you’re ever disabled.
5. Shop around and be prepared
When you’re buying disability insurance (or any insurance), Orman recommends you keep some tips in mind to make it easier to find a policy that works for you.
Find your best rate by comparing quotes and shopping around
Read every word of the policy you’re buying
Make sure you understand unfamiliar terms
Know what your policy does and doesn't cover
Understand how to file a claim and qualify for benefits
Review your policy after big life changes
Frequently asked questions
Is long-term disability insurance the same as long-term care insurance?
No. Disability insurance covers your income if you can’t work because of an injury or illness. Long-term care insurance covers home-health care, nursing homes, and other services when you can no longer take care of yourself as an older adult.
Do you need disability insurance if you have a policy through work?
Yes, you probably need your own disability insurance policy even if you already have coverage through work. An employer-provided policy may have only limited, short-term coverage that wouldn’t be any good for a condition that keeps you out of work for years.
Do you need disability insurance if you have life insurance?
Yes, disability insurance replaces your income if you can’t work while you’re alive. Life insurance, on the other hand, pays your family or other beneficiaries after you die.
