Most people don’t think they need disability insurance, but since disability affects a much higher amount of people than most of us would expect (about 1 in 3 people around the age of 30 will experience some sort of disability before the age of 65), disability insurance is one of the most important types of coverage to have. A serious illness or injury can be devastating physically and emotionally. The last thing you want is to add financial insecurity to your list of worries. However, when shopping around for a policy, how do you knowwhat amount of coverage is right for you?

Here are a few simple tips to determine how much disability insurance you need:

  • Monthly Budget

Your first step should be to determine exactly how much money it will take each month to cover your expenses if you suddenly found yourself out of work. Make a list of all of your expenses including food, rent/mortgage, entertainment, clothing etc. Don’t forget to account for extra expenses that pop up every few months.  To get an accurate idea of what you’ll need, you can average those out by adding up your annual expenses and simply dividing by 12.

  • Medical Expenses

Because a major disability can significantly alter your lifestyle, it stands to reason that your spending habits will most definitely change in the event of injury or illness. For instance, since you will be out of work for a period of time, you’ll have to factor in the fact that disability impacts your ability to earn an income at a time when your medical expenses can increase considerably.

It is typically necessary to get coverage that pays benefits of 50 to 70 percent of income (that’s also the maximum most companies would offer). Insurance companies won’t offer more because they want to ensurean individual has a financial incentive to return to work. It is also important to factor in your medical benefits and also consider whether you want enough disability income to continue building your savings, since your contributions to retirement plans will halt if you can no longer work.

  • Saving for the Future

You’re also going to want to factor in any money you were saving for the future. Since you’ll no longer be able to contribute much, if any, money to your savings and retirement accounts. And if you have kids, your disability could seriously impact their college funds and whatever money you had been putting aside for their future.You’ll want a policy that will give you room to continue to contribute to these funds

  • Consider Your Spouse’s Income

Depending on what kind of care you require, your spouse or partner might have to cut down some hours to help you with your recovery, which means even more income lost due to your disability. So, even if you’re not the breadwinner of the house, it is important that you have adequate coverage.


Stay on the Side of Caution

If you are too conservative with your estimate, you might end up under-prepared if and when tragedy strikes.

Nobody wants to talk about disability insurance, but during your healthy, working years, your ability to earn an income is absolutely essential for your future financial security. If you don’t have an adequate plan for replacing any potential loss of income, even a small disability can lead to financial devastation.

Once you have a good estimate of what your needs will be, talk to an insurance broker who specializes in disability insurance to see what sort of coverage you’ll be eligible for. It might just save you and your family’s future. To get started today, use our disability insurance quotes tool.