We all have fears. Some of us are scared of sharks, spiders, or snakes. Some people are scared of heights or flying. If you ask someone what their biggest fear is, not many people say: “becoming disabled and not being able to work”.
Becoming disabled can impact someone at any age and is more probable than you’d think. Surprisingly, one in four of today’s 20-year-olds will be out of work for at least a year because of a disability before they reach normal retirement age, which is currently 67 years old.
Your odds of becoming disabled during your working years is higher than being bit by a snake or being involved in a plane crash. Still, at least 51 million working people in the US don’t have disability insurance, other than basic coverage through Social Security (Disability statistics).
Furthermore, must Americans live paycheck to paycheck and cannot afford an unexpected expense without going into debt. Even if you have sufficient savings to cover an unexpected expense, most people are woefully unprepared to cover the financial burdens that come with a disability.
In addition to the loss of income, there are medical deductibles and co-pays for recovery. In some severe cases, you may lose your job and your healthcare coverage as a result, which can end in higher healthcare expenses through the exchange.
A large study of consumer bankruptcy filings found that 77.8% of debtors cited income loss as a contributor to their bankruptcy. This included 44.3% specifically citing medically related work loss as a contributor (Disability statistics).
Another fact to consider: the average long-term disability absence lasts 2.5 years. Most Americans don’t know how they would pay their bills if they couldn’t work for 6-months or longer.
The most common reasons for long-term disability claims are common ailments such as:
- Musculoskeletal disorders such as osteoarthritis, back pain, and tendonitis (26%)
- Cancer (15%)
- Injuries such as fractures, sprains, and strains of muscles and ligaments (11%)
- Mental health issues (9%)
- Circulatory issues such as a heart attack or stroke (9%)
Even though Social Security Disability is there to help, only 30% of Social Security Disability Insurance (SSDI) claimants had their applications approved: around 20% at the initial application stage and the remainder after a reconsideration or appeals process (Disability statistics). While navigating this process, the disabled person must figure out how to make ends meet while they wait for a decision, and even if they are awarded benefits, it is not usually enough to get by.
We’ve helped our fair share of clients through disability. Some have had to re-learn how to walk and talk, some are unable to work entirely, others just need time to recover. It spans a wide spectrum, but it can happen to anyone.
Ideally, people have long-term disability policies in place before they need to collect a benefit. Most long-term disability policies cost about 1-3% of your annual income, although costs vary depending on the specific policy and policyholder. Some employers offer group long-term disability, and those policies tend to be even more cost friendly. Although many employees don’t opt into the benefit.
Long-term disability policies pay 60-80% of your pre-disability income. If you pay for the premiums yourself, this income benefit is tax free. If your employer pays for the benefit, it will be taxable to you as income when you claim benefits.
Each year, we have clients come to us with disaster. It might be a sudden death or unexpected expense, but experiencing a disability is one of them. Through the financial planning process, we work diligently to help prepare our clients for when disaster strikes, whatever it may be. Sometimes that is through estate planning or establishing proper emergency savings, sometimes it is through long-term disability.
Almost everyone has a need for a long-term disability policy. Even if you aren’t a “breadwinner” in your family, becoming disabled results in high medical bills and possibly regular care or rehabilitation costs. These high costs put financial strain on your family, even if you weren’t a big income generator before the disability.
Even people who don’t earn income should consider a long-term disability policy. For example, if you became disabled as a stay-at-home parent or caregiver, the daily household and childcare tasks would need to be performed by someone else while you recover. Probably a nanny, daycare, or house cleaner, which all cost money. For people who don’t earn income but provide this major benefit to their families, there are specialized policies which will provide a lump sum of money if you cannot perform daily household duties for over a year. These are typically “riders” added to the working spouse’s long-term disability policy. The rider is much cheaper than a standard long-term disability policy.
Long-term disability insurance protects a wide range of workers:
- People whose income funds the livelihood for themselves and their larger household (such as a “breadwinner”).
- People who use their hands or bodies in their work and may suffer from conditions such as arthritis, strains, or other Musculoskeletal disorders over time.
- People who spent a lot of time and money to be able to do their job, especially those with student loans as a result (medical professionals, lawyers, etc.)
- People with a family history of medical issues which may limit their ability to stay working.
You’ve Convinced Me, but What Now?
- Check with your employer and see if they offer a long-term disability benefit to employees. If so, sign up for the benefit. Note: If you pay for the premium yourself, you will receive the benefit tax free. Therefore, paying the premium yourself is usually preferable versus your employer paying it for you.
- If your employer doesn’t offer long-term disability, ask if they’d consider expanding the benefits package to include the benefit.
- If your employer doesn’t offer long-term disability and they don’t plan to anytime soon, talk to us about placing an individual long-term disability policy. We can run quotes for you.
- If you’re self-employed and don’t have employees, talk to us and we can run some quotes for you. Some professional associations also offer long-term disability policies at a cheaper rate than if you go the individual route, since the association is buying insurance for a larger group of people.
- If you are self-employed and have employees, talk to us about getting a group long-term disability policy for you and your employees. Not only can you embolden your benefits package, but you can take advantage of more affordable premiums than with an individual policy.
- If you already have a long-term disability policy, review the terms and make sure it will provide you with suitable benefits based on your current salary. There are usually options to increase the coverage amounts at different intervals, such as every few years, depending on your individual policy.
Other Important Things to Know:
- Some policies offer “graded” premiums, designed to help people getting into the workforce establish coverage with the idea that your income will increase over time. The premiums gradually go up until they level out at the base premium.
- You want to look at “guaranteed renewable” or “non-cancellable” policies:
- Guaranteed renewable means the insurance company cannot cancel your policy as long as you pay the premiums. Premiums may go up over time, but insurance companies cannot raise your premium unless they raise it for an entire insured class or rate classification.
- Non-cancellable policies are preferred to guaranteed renewable, because they provide locked-in premiums that cannot rise in price. Furthermore, like the guaranteed renewable, as long as you pay premiums, the insurance company cannot cancel your coverage.
No matter what fears you wrestle with, make disability one less thing to worry about. Talk to us about bridging this gap in your financial health and we’ll help put you on the path to financial clarity and confidence to live your unique story.
Citations
Disability statistics. The Council For Disability Income Awareness. (n.d.). https://thecdia.org/disability-statistics/
Guardian Editorial Team. (2025, March 20). What does long term disability insurance cost. Guardian. https://www.guardianlife.com/disability-insurance/long-term-disability-insurance-cost
About TenBridge Partners
TenBridge Partners is an independent financial planning and investment management firm based in Portland, Oregon with a simple focus of honoring the fiduciary responsibility of putting clients first. Guiding with curiosity and trusted expertise, we empower people to live their unique story with financial clarity and confidence.
Planning is central to everything we do. Our focus is on a complete understanding of your needs through the financial planning process, putting your success at the heart of our work.
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