Do I need disability insurance?
By Colson · Updated June 13, 2026
If you rely on your income and don't have years of savings, you likely need disability insurance — it replaces about 60% of your income if illness or injury keeps you from working. Your ability to earn is usually your largest asset, and it's more likely to be disrupted than you'd think.
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A long disability is more common during a working career than an early death, yet far fewer people insure against it. Without coverage, a serious illness or injury can wipe out savings fast. Disability insurance replaces a portion of your paycheck so your bills stay covered while you can't work.
Short-term vs. long-term
Short-term disability covers a few weeks to months (good for temporary recoveries); long-term disability covers years or to retirement and is the more important protection. Employer group coverage helps but often replaces less than you'd need and ends if you change jobs — an individual policy is portable and fills the gap.
How much coverage should you carry?
Individual policies typically replace about 60% of gross income (benefits are usually tax-free when you pay premiums yourself). Aim to cover your essential monthly expenses, and subtract any employer coverage you already have to find the gap.
Frequently asked questions
How much disability insurance do I need?
Enough to cover your essential expenses — typically around 60% of your gross income, which is what individual policies usually cap at. Subtract any employer coverage to find the additional amount you need.
Is employer disability insurance enough?
Often not. Group coverage may replace less than you need, can be taxable, and ends when you leave the job. A supplemental individual policy is portable and helps close the gap.
Are disability benefits taxed?
If you pay the premiums with after-tax dollars, benefits are generally tax-free. If your employer pays, benefits are usually taxable — which is why individually-paid policies target ~60% replacement.
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