Short term disability...?

Question

Is it worth what you pay for it? Or should you invest that money in other ways?

Answer 1

No insurance is 'worth what you pay for it' until it's time to collect benefits. Most lines of health insurance only pay about 60% of the total premiums toward benefits. The rest goes to expenses and profits.

Answer 2

Insurance should never be compared to an investment. It's a completely different financial strategy.

We all encounter risk in life. Not all risk is insurable. Insurable risk is, of necesity, a low risk - it's not likely to happen. If it was likely to happen, it wouldn't be profitable to the insurance company.

The consumer should look at the financial consequence of a defined, insurable risk and then decide if it can be "covered" with current assets.

In your case, could a short term disability create a serious financial problem for you? If you have enough cash available to cover a loss of income for an extended period of time, then it probably wouldn't make much sense to buy it. If you don't have the cash, you can pay a small amount of money on a regular basis (premium) to secure access to a larger amount of money in the event of a disabling illness or accident.

But, you ask, what if you invest the money and save for such an event? You could try. But, what if you became disabled before you had the chance to save that amount? And, then there is the question of taxes. While you are saving all that money, you are going to be paying tax on the gains, negating somewhat your ability to build up the cash. Unless you deduct your premium payments into a DI plan from your taxes, any benefits paid by the insurance company to you would probably be income tax free.

Bottom line: no one "needs" insurance, but you may want to purchase it because the adverse financial consequence to you from an insuranble risk coming to pass could be very serious and more than you could afford.

Your call.

Answer 3

I am a firm believer that you should have it I was incapacitated for a two year period and I had both short term and long term disability, the short term helped bridge the gap between my accumulated sick and vacation pay and with the ltd I did not miss a beat.I had 1 year of ltd after 6 months of short term and with what I could get from my 401 and other savings I was able to continue to pay all my bills until I was able to go back to work.My savings and 401 took a big hit but I was able to maintain my credit and keep my car and a roof over my head. I thought I would never have to use it and look at what happened to me, but for a minimum premium it was worth it.

Answer 4

I pay extra where I work for short term disability. It was worth it when I had to use it. I used it when I had my daughter and my surgery. I think it is.