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This Web site contains a compilation of more than a thousand consumer finance  columns written by Tony Novak from the 1980s through 2006, updated and reformatted for maximum usefulness today.  New material was added after 2010.

Content is the opinion of the author and does not represent the position of any other person or entity. Information is from sources believed to be reliable but cannot be guaranteed.

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Disability income insurance

originally posted: 11/22/2006  reposted: 2/18/2011 This post has not been recently reviewed or revised by the author and may be out of date. If you notice an error or are in doubt, please send a new question by email or ask for an update. Email

Q: I read that disability insurance is the most important type of health insurance to have so why is this is not included in my health insurance policy?

A: Most health insurance policies do not include coverage for lost income due to an accident or an illness. This coverage is obtained by taking a separate disability income policy. Just like major medical insurance, most people are covered under an employer-sponsored group insurance plan. When this is not available, individuals must find their own coverage. The reason that many people say it is the most important type of health insurance is that arrangements for medical expenses can be made after the date of treatment. Any hospital, for example, will accept payments over time based on a reasonable percentage of income. For those without an earned income or ability to pay for medical expenses, Medicaid is available pay the charges for basic medical treatment in exchange for a lien on a home or personal assets that can be satisfied after death. But arrangements for replacement of income must always be made in advance. Disability that causes a drop in income is the leading cause of home foreclosures. There is little ability to negotiate payments with a mortgage company or utility company, for example. The good news is that disability insurance is relatively inexpensive sine less than half of us will incur a disability lasting more than 90 days during our working career. The cost of coverage is about 1/5 the cost of major medical insurance and approximately equal to the cost of long term care insurance. For most people this coverage works out to 2% of their gross income. Working people tend to start disability income insurance after their income starts to increase in their 30s. Then most tend to switch from disability income insurance to long term care insurance after age 55 since protecting assets from those expenses becomes more important than replacing earned income at that stage of life. The number of insurance companies offering this coverage has declined sharply due to consolidation in the insurance industry. There are eight insurance companies that issue the large majority of disability income insurance in the U.S. Each tends to focus on a specific market niche based on the requirements of the occupation. For example, one is best for physicians, others are best for tradesmen, Disability income insurance and long term care insurance is not available for direct online enrollment so it is best to work with an individual agent. OnlineAdviser offers this service as part of the overall financial planning service.


More resources:

OnlineAdviser personal financial planning service