How important is disability insurance, e.g. long-term, LTD? Employer offers none

Question

How important is it to have disability insurance? My employer does not provide it. I work in the web development business.

Answer 1

The reason to have disability insurance is to replace your income if you become disabled and are no longer able to work. For this purpose, it is kind of similar to life insurance where you want to replace your income to take care of people that depend on your income if you die, but now you are included in the people that depend on your income.

If your employer doesn't provide any disability insurance then it would be wise to look for some Long Term disability insurance. Short Term disability is more expensive than long term and it is USUALLY better and cheaper to have a good emergency fund to provide for a short term disability such as being sick for a month and not able to work than to buy short-term.

As a web developer - you should be able to get long term disability insurance at a reasonable cost, unless you have some dangerous hobbies like forest fire fighting or shark juggling.

Answer 2

(Oops - I had been meaning to come back to this Q. sooner. Just saw my reminder, so here goes.)

Shortly before this question was asked, I actually read a good blog post on the subject of disability insurance at Evolution of Wealth - 7 Ways Your Group Disability Will Fail. I know the OP doesn't have group disability (and hence the question), but the reason I'm highlighting it is:

Even somebody with a group disability policy from their employer may want to consider supplementing it with an individual policy that has better coverage.

In my case, the reason I opted for an individual policy was due to point #6 from the post:

... ways that group disability coverage will fail you:

... [etc]

6) You can go work somewhere else. With disability insurance there is a feature called own-occupation. This means that you are unable to perform the duties of your specific occupation even if you are able to work in an other occupation. Good group disability coverage will cover your own-occupation for a period of 2 years after that if you can work anywhere (yes, even McDonald’s) then you receive no more benefits. Notice I said ‘good’ coverage, a lot of policies don’t even have the own-occupation benefit. ...

I made sure my own individual LTD policy included coverage of own-occupation until age 65. So, do pay attention to the specific features and limitations of LTD policies when shopping for one.

Answer 3

(My wife works for an insurance broker in the US, so take that grain of salt with my answer)

Disability insurance covers your income should you be unable to work. Some disability will be paid before social security (so you get both incomes) and some will be paid after (so your insurance will fill whatever gap SS leaves)

Everybody in the US gets Social Security, which has a disability provision you can use. The additional disability insurance is a good idea for people with a family who will rely on your income for the future, or even for yourself should you work in a dangerous position.

My family has it, and we consider it essential for our well being, but I consider insurance on many things a necessity not a luxury. (except pet insurance, I find that to be a luxury.)