Disability insurance basics

Your single biggest financial asset, if you're under 50, isn't your house, your portfolio, or your car. It's the remaining years of your future income. Disability insurance protects exactly that — paying you a monthly benefit if you can't work due to illness or injury. For most working-age adults, it matters more than life insurance.

Two types

• Short-term disability (STD): covers 3–6 months of lost income. Often employer-provided. Handles accidents, surgeries, pregnancy complications.
• Long-term disability (LTD): kicks in after short-term, covers months or years of lost income. Often the more important policy, and often underprovided by employers.

Key terms to understand

• 'Own occupation' vs. 'any occupation' — own occ pays if you can't do YOUR job; any occ pays only if you can't do ANY job. Own occ is far more valuable for specialized professionals.
• Benefit period — how long payments continue. 2 years, 5 years, or 'to age 65.' Longer is better.
• Elimination period — how long you have to be disabled before payments start. 90 days is standard.
• Benefit amount — usually 60–70% of your pre-disability income. Tax-free if you paid premiums with post-tax dollars.