Disability insurance.
In plain English
Disability insurance insures the thing most people never think to insure: their income. Short-term policies cover weeks to months; long-term policies can pay until recovery or retirement age, typically replacing 50% to 70% of pay. Many employers offer group coverage, sometimes free, sometimes as a paycheck deduction, and the tax treatment flips on who paid: premiums paid by your employer mean taxable benefits; premiums you paid with after-tax money mean tax-free benefits.
01Why it matters
For a working adult, the odds of a multi-month disability before retirement are much higher than the odds of dying young, yet life insurance gets all the attention. Your income is the engine every other plan depends on.
02The math, step by step
$60,000 earner with 60% long-term coverage: a qualifying disability pays $3,000/month. If the employer paid the premium, that's taxable; if you paid $25/month after-tax for it, it's not.
03What this is NOT
This is not workers' comp (job injuries only) and not Social Security disability (strict definition, long waits, modest benefit). Private or employer coverage is the layer that catches what those miss.
04Receipts
Every figure on this page is sourced to a primary document. Tap to open the original.
Plain-English answers from our glossary. Receipts included. Never advice.
Educational tool. Answers come only from ClearMoneySchool's published glossary and are not advice. Why we never give advice