"I thought it was the last thing in the world I needed," says Kaplan. Now 39, married, and a mother of three with her own law firm in Mequon, Wis., Kaplan feels strongly about the need for disability insurance. So strongly, in fact, that she reimburses her full-time employees who purchase individual disability insurance. By reimbursing her employees for the premium costs instead of providing it through their payroll, her workers are able to collect disability payments tax-free.
Kaplan's ideas about disability insurance come from personal experience. She kept up her own disability policy even when she worked for firms that provided disability benefits. Under many employee plans, she realized, the definition of just what constitutes a disability was prohibitively narrow.
What Counts as a Disability?
Disability insurance is designed to provide benefits when a policyholder can't perform his or her primary job. But it's important to read the fine print, Kaplan warns. Even if she were flat on her back, some employee plans wouldn't have provided benefits -- because under their definition she would still be able to talk on the phone to clients. Kaplan's personal policy, on the other hand, acknowledges that personal contact with her clients is part of her job. Any accident or illness that hindered her mobility would activate her disability payments.
In her second and third pregnancies, Kaplan needed several months of bed rest. She was able to depend on her disability checks to help maintain her home and professional obligations. "Because I had the insurance protection, my doctors and I and the medical team had the luxury of being cautious enough to let me have a healthy son," she said. "If I didn't have the policy, I would have worked and pushed harder and I might not have had the successful arrival of a son."
Women More Vulnerable
According to the Bureau of Labor Statistics, the number of women in the work force is growing twice as fast as the number of men. And on the average, women contribute 30 to 40% of all household income.
Yet a woman in her prime working years is much more likely to become disabled -- permanently or temporarily -- than a man. According to the Journal of the American Society of Certified Life Underwriters, a 35-year-old woman in a professional position is three times as likely as a man of the same age to become disabled for 90 days or more.
A company isn't required by law to offer long-term disability insurance -- so many don't. If your company does, it's important to understand exactly how much reimbursement to which you'll be entitled. Disability benefits rarely cover 100% of a worker's income; typically they add up to around 60% of your gross salary -- which can leave you short in meeting your monthly bills.
Many women believe they can rely on Social Security Benefits as potential income. But according to the 1998 Social Security Handbook, a full five calendar months must pass before the government can provide any disability benefits. And to qualify for benefits, your disability must not only prevent you from performing any type of gainful employment, but it also must either last at least 12 months or be expected to result in death.
How Much is Enough?
To determine how much disability insurance you need, the California Department of Insurance suggests you add up your necessary monthly expenses -- such as housing, car loans, food, utilities, and child care -- and then subtract any investment income. This is the amount you need to cover expenses in case of disability.
Then add up whatever monthly long-term disability payments you would get from you employer, and add to it your spouse's take-home pay. This is your income in case of disability.
If your second subtotal is greater than your first, you probably have adequate coverage. But if your second subtotal is smaller than the first, subtract your spouse's take-home pay from the first subtotal to see how much additional monthly coverage you should get for yourself.