Should I Buy Long Term Disability Insurance?

When It Makes Sense

• Good fit: You are a primary earn‑in for a family, have limited employer‑provided disability benefits, and your occupation carries a moderate risk of injury or chronic illness that could prevent you from working for months or years.
• Good fit: You have modest savings and limited ability to replace your income for an extended period, making a financial safety net essential to avoid depleting retirement assets.

When You Should Avoid It

• Warning sign: Your employer already offers a robust, non‑taxable long‑term disability plan that covers a high percentage of your salary for the same conditions you’re considering.
• Warning sign: You maintain a sizable emergency fund and diversified income sources (e.g., spouse’s earnings, investment income) that can cover several months of expenses without greatly harming long‑term goals.

Pros and Cons

Pros

• Provides a steady income replacement if you cannot work due to illness or injury, helping to preserve savings and retirement funds.
• Premiums are often tax‑deductible for self‑employed individuals and can be tailored with riders (e.g., cost‑of‑living adjustments) to suit specific needs.

Cons

• Premiums can be relatively high, especially for older applicants or those with pre‑existing conditions, potentially reducing present‑day cash flow.
• Policies may include waiting periods (common 90‑180 days) and exclusions that limit coverage for certain occupations or medical conditions.

Decision Checklist

• Do I have adequate employer‑provided disability coverage, and does it meet my income‑replacement goals?
• Can my current savings and other income sources sustain my household for at least six months to a year without severe hardship?
• Am I comfortable with the cost of premiums relative to the probability of a long‑term disability occurring in my situation?

Alternatives to Consider

Instead of purchasing a stand‑alone LTD policy, you might explore: (1) increasing contributions to a health‑savings account (HSA) to offset future medical costs; (2) negotiating a rider on an existing short‑term disability plan that extends coverage; (3) building a larger emergency fund; or (4) reviewing any disability benefits offered through professional associations or union contracts.

Final Recommendation

If you rely heavily on your own earnings, lack sufficient employer coverage, and do not have a large emergency fund, buying long‑term disability insurance is generally advisable. Conversely, if you are well‑covered through your employer, have strong financial buffers, or the premium cost outweighs the perceived risk, you may postpone or forego a separate policy. In all cases, consult a licensed insurance professional and, if needed, a financial advisor to tailor the decision to your specific circumstances.