Could you pay your bills if you stopped getting your paycheck? For how long?

While most of us have life insurance, not many of us have disability insurance, even though it's more likely you'll become disabled than die before age 65! In fact, According to the American Council of Life Insurers, nearly one-third of all Americans will suffer a serious disability sometime between the ages of 35 and 65.  And 43% of Americans over 40 will experience some sort of health emergency that will necessitate that they be out of work for 90 days or more.  That's a long time!

Disability insurance is expensive—running from $1,500 to over $3,000 per year—so before you buy disability insurance, let's make sure you really need it. Find out if you have disability insurance through work. If you do, ask your employer how long your company will continue paying your regular paycheck if you become disabled, what percentage of your salary your disability plan pays while you're laid up, and how long you have to wait for the benefits to start. Using this information, you can decide if your employer's policy is adequate, or if you need to buy additional coverage.

Add your sick pay and any other income (spouse's salary, investment income, etc.) to your emergency savings, then divide that total by the amount of your monthly expenses. This will tell you how long you can wait for your employer's disability benefits to kick in.

Our hope is that you have enough "rainy day" money tucked away that you can get through this waiting period on your own. If you don't have emergency savings and think it will take you some time to build up enough funds to get through a waiting period, consider buying a disability policy to bridge the gap.

If you have disability insurance through work and can live with the waiting period, the only other reason you may need additional coverage is to make up for an income shortfall. For example, if your employer's plan pays 60% of your current salary, and you can't get by on that, you could make up some of that missing income with your own policy.

Keep in mind, however, that the most income you'll be able to replace through all sources of disability income combined is 80% of your salary. So, if you have disability insurance through your employer that pays you 60% of your current salary, you could only cover another 20% of your salary through an individual policy.

If you don't have disability insurance through your employer, you should consider buying a policy of your own. You can buy an individual policy from any top insurance company. You should also check with any professional organizations you belong to. They may offer quite a savings on policies.

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