Staying financially afloat through illness or injury

How stacked is your emergency fund?

You might be able to pay expenses for a month or two, but maybe not. You know that stuff happens, but you cross your fingers and hope for the best.

You’re not alone, according to a new survey from Policygenius of more than 1,500 people, which found that only 12.5 percent of adults polled had disability insurance.

Disability insurance can be a financial life saver if you’re injured or too ill to work. It makes sense to prepare for this possibility.

What are the odds?

“You’re far more likely to experience a disability than an untimely death, yet many people carry life insurance," but not disability insurance. "If you become disabled, you’re likely a heavier financial burden on the family, because they have lost your income and have expenses to take care of you,” says David Zavarelli, a certified financial planner with LPL Financial in Danbury, Connecticut. 

Take action

Many people might first turn to federal or state disability benefits, but some experts point out the limitations of those safety nets. Vidal Peoples, a financial representative with Guardian in Manhattan, says, "On the federal level, SSDI [Social Security Disability Insurance] has stringent requirements for one to qualify, with only about 30 percent of claims being approved at the applied-for level."

In addition, Michael Quinn of Florida-based The Quinn Group points out that "New York does offer state disability insurance ... but it is short-term coverage only, which would provide a monthly benefit for up to 26 weeks. There is also a maximum benefit of $170 per week," which may fall far short of expenses.

First, you should find out if your employer offers group coverage. But even if it does, you might still need more to cover your expenses. Workplace group plans may cover 60 percent of base pay only. If it is paid for by the employer or deducted on a pretax basis, that 60 percent benefit is taxable.

“The goal is to have 100 percent of your net after-tax income. This is where individual disability insurance plays a vital role in covering the taxed amount and any bonuses, commissions, incentive pay or overtime,” says Peoples.

Look for a supplemental policy. Raymer Malone, president of AMP Strategies in Rockville Center, says, “Work with an independent agent who understands your needs, knows what's most important to you and can work with all the major carriers to find you the policy with the best pricing that fits those goals.”