Disability insurance is more important for most workers than life insurance. You are three times more likely to become disabled than die before age 65. The most common disabilities are arthritis, back pain, and heart problems. Although death is certainly a great human tragedy, disability is a more serious financial problem than death, since a death reduces expenses and a disability does not.
You need quarters of work credit to qualify for Social Security disability benefits. Currently, you earn a quarter of credit for every multiple of $1,260 of employment (including self-employment) up to a maximum of four.
Credits to qualify based on age at disability:
age credits needed
Under 24 6 credits in the last 3 years
24-31 (age at disability-21) x 2
31-42 20 (20 in last 10 years required for all ages 31+)
You can look up what your disability payments would be at my Social Security. My disability benefit would have been about 45% of my salary.
There is a five month elimination period (period in which no benefits are paid) before you can collect Social Security disability benefits.
Our former employer offered short term and long term disability insurance. The short term disability insurance covered for twenty-four weeks, after a fourteen day elimination period. The long term disability insurance had a 180 day elimination period, or about six months. With our employment, we could accumulate twelve sick days a year up to 180 days total. Once you accumulated six months work of sick days, about 120, there really was no need for short-term disability.
The long term disability insurance paid 60% of salary. The long term disability policy is offset by Social Security payments. However, the long term disability coverage was almost $700 a month above what I would have received from Social Security, so I would have gotten that amount in addition to Social Security disability. The insurance was cheap and subsidized by our employer. It was easier to qualify for than Social Security, since the standard was not being able to do your job vs. not being able to do any job.
If Social Security disability and your employers disability insurance are inadequate, you could apply for private insurance. Consumer Reports Online did an article on disability insurance. If you are under 55, premiums are typically 1%-3% of salary. If you are over 55, premiums are typically about 4% of salary. Clark Howard says it is becoming an upscale product.