The Bogleheads' Guide to Investing

Here are some tips on buying disability coverage. First, buy as much disability coverage as you think you’ll need. The maximum amount you can purchase is usually 60 percent of your income. Second, consider purchasing your own policy with after-tax dollars instead of buying one through your employer. Then, if you ever need to draw disability, the income from the personal policy would be tax-free. With the way jobs come and go in today’s free-agent economy, you might not want to depend on your employer for disability coverage. If you lose the job and become disabled, you’re in big trouble. Here are some other features a good disability policy will have: It covers your inability to work in your own occupation. It requires a waiting period of no more than 90 days before coverage begins. It carries a cost-of-living adjustment. Benefits are provided for partial disability. It provides the longest benefit in your own occupation for as long as possible or at least until age 65. If you’re still thinking, “I don’t need disability,” please consider these statistics: There’s a 20 percent chance that a 35-year-old will become disabled before age 65 and a one in seven chance that he or she will be disabled for at least five years. The odds of becoming disabled are far greater than the odds of dying prematurely. When you consider just the income lost, a year of total disability can erase 10 years of saving for someone who saves 10 percent of his or her income. Don’t fail to insure your greatest financial asset.