Disability Insurance

Most financial advisors recommend disability coverage that replaces 60-70% of your pre-tax income, which is typically the maximum most carriers will offer. The exact amount depends on your monthly expenses, savings, spousal income, and whether the policy pays benefits tax-free (individual policies purchased with after-tax dollars) or taxable (employer-paid group policies). A common benchmark: if you earn $100,000 per year, look for coverage that pays $5,000-$6,000 per month. Social Security Disability replaces only a portion of income for those who qualify, and qualification is strict — it’s not a reliable substitute for private coverage.

Short-term disability (STD) pays benefits for 3-6 months with a waiting period of 0-14 days and is commonly employer-provided. Long-term disability (LTD) pays benefits for 2 years, 5 years, to age 65, or to age 67, with waiting periods of 30-180 days. LTD is the more important coverage because most disabilities that cause financial hardship last longer than a few months. STD typically covers pregnancy recovery and short-duration injuries, while LTD protects against serious illnesses like cancer, MS, or chronic back conditions. Ideally you carry both — STD bridges the gap until LTD benefits start.

Own-occupation (true own-occ) means the carrier pays benefits if you can’t perform the duties of your specific profession, even if you could do other work. A surgeon with hand tremors could collect full benefits while still earning income as a medical consultant. This is the strongest definition and is essential for high-income professionals like physicians, dentists, attorneys, and executives. Weaker definitions include ‘modified own-occupation’ (benefits stop if you take any other work) and ‘any-occupation’ (benefits only if you can’t work in any job you’re reasonably suited for). Premium for true own-occ runs 10-20% higher but is usually worth it for specialized professionals.

Yes, though pre-existing conditions often result in exclusions, rate increases, or both. Well-controlled conditions like hypertension or hypothyroidism typically have minimal impact. Conditions that affect the body part or system most relevant to the potential claim — back problems, mental health history, autoimmune disorders — often result in exclusion riders that carve out those conditions from coverage. Carrier selection matters enormously. Guardian, Principal, Standard, MassMutual, and Ameritas each underwrite different conditions more or less favorably. Working with a broker who places significant disability volume improves outcomes substantially compared to applying to one carrier.

The elimination period is how long you must be disabled before benefits start paying. Common options are 30, 60, 90, 180, or 365 days. A 90-day elimination period is the most common choice for long-term disability because it balances premium cost against emergency fund needs. Choosing a longer elimination period (180 or 365 days) reduces premium by 20-40% but requires more savings to bridge the gap. Shorter periods (30-60 days) cost significantly more. If you have 3-6 months of living expenses saved, 90 days is typically the sweet spot.