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Why DI, When, How Much, & How Long?


Why DI?When DI?How Much DI?How Long DI?



Why Buy DI?:

If you became too hurt or sick to work, how long would you be able to pay your bills and maintain your lifestyle?  If you are like many Americans, you probably don't have enough savings to last more than a few months.  Even if you believe you already have protection through other sources, you may not have as much as you think.  Can you rely solely on employer sponsored group disability plans, Social Security, worker's comp, retirement savings, and spousal income?  To learn more on why you can't, we recommend that you visit the Non-Profit Counsel for Disability Awareness' website: 


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When DI?:

We believe you should consider DI as soon as you are eligible to apply for coverage.  Why?  Because the rates are based on age so it makes sense to lock in at a lower rate.  Additionally, you want to purchase the policy before you have any changes in health, because waiting can hinder your insurability.  Your health can change in a heartbeat so don't wait until it is too late.  In general, if you have a preexisting condition, (assuming that condition does not prevent you from obtaining coverage) that condition would likely be excluded permanently or temporarily.

Whenever available, consider purchasing a 90 day waiting period.  The 90 day waiting period (WP), also referred to as an elimination period (EP), is where you must be totally and/or residually disabled for a specific period of time before the benefits are paid.  Shorter and longer elimination periods are available but can be unaffordable (shorter EP) or don't save you enough (longer EP) to make it worthwhile.

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How Much DI?:

Other than in rare Catastrophic rider qualifying scenarios discussed in other parts of this site, no disability carrier will issue coverage of 100% of your after tax earnings.  The reason for this is there must be some incentive to return to work if you can.  Even if you have group long term disability coverage through your employer, it may pay you less than you think.  Let's take for example an individual that makes $180,000 a year ($150k salary and $30k bonus).  On a monthly basis this person will clear about $11,113 after all taxes and withholdings (assuming joint filing with 2016 federal tax rates and average state income tax rates.)   Let's also assume that the same person has the typical employer paid 60% group disability benefit and this one has a cap of $10,000 month.  Since the definition of covered earnings is base salary only on this plan (like many) the person will receive 60% of base salary only which is $7500 month.  After taxes since the $7500 month benefit is taxable as income, the person clears only about $6000 month which is a 46% reduction in spendable income.  Had this individual qualified for and purchased a supplemental disability policy with Guardian this person would get an additional $4190 of tax free benefits.  This results on only a net reduction in spendable income on disability claim of only about 8%.

In addition to above, the more you make the more you are going to be affected by the group long term disability (LTD) benefit cap where you work.  If you work for an employer that offers 60% group LTD benefits with a cap of $5000 month, then if you make more than $100k a year you are going to have a lower ratio than the 60%.  For example, lets say you make $200k a year.  A 5000 month group cap means that you have half the new replacement ratio of 30% because of the cap.  If there was no cap in place you would have received $10,000, twice your actual group LTD monthly amount.

We believe it is in your interest to obtain as much coverage as you can since you can not purchase 100% protection of your income.

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How Long DI?: 

The benefit period is the maximum amount of time for which the company will pay benefits for a continuous disability from the same cause.  A two year benefit period can pay a maximum of two years for the same claim even if you remained disabled for a longer period of time.  According to the non profit Council for Disability Awareness's website:, a typical healthy male or female age 35 that has a disability that lasts greater than three months has a 38% chance that a disability claim will last longer than 5 years.   Since most claims do not last longer than 5 years ( ), there is not that much a difference in premium to extend a 5 year benefit period to the maximum benefit period available.  Therefore, we believe you should consider purchasing a benefit period that covers you for as long as you plan to work, usually age 65 or 67. 

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Financial Representatives of the Guardian Life Insurance Company of America (Guardian), New York, New York. Financial Growth Partners is a wholly owned subsidiary of Guardian.  Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation. This website contains the opinions of the author but not necessarily those of The Guardian Life Insurance Company (Guardian), New York, NY or its subsidiaries and such opinions are subject to change without notice.  Important Disclosures:  Terms and Conditions    Privacy Policy

This website is intended for general public use. By providing this content, The Guardian Life Insurance Company of America, and their affiliates and subsidiaries are not undertaking to provide advice or recommendations for any specific individual or situation, or to otherwise act in a fiduciary capacity. Please contact a financial representative for guidance and information that is specific to your individual situation.

Individual disability income products underwritten and issued by Berkshire Life Insurance Company of America (BLICOA), Pittsfield, MA or provided by Guardian. BLICOA is a wholly owned stock subsidiary of and administrator for the Guardian Life Insurance Company of America (Guardian), New York, NY. Product provisions and availability may vary by state. 

2024-171414 Exp 4/26