Blog Article

Navigating Disability Insurance: A Comprehensive Guide to Determining Your Coverage Needs

By Merriman Wealth Management, Wealth Advisor
Published On 03/26/2024

Determining the appropriate amount of disability coverage requires careful consideration of various factors to ensure comprehensive protection. Here’s a step-by-step guide to help individuals assess their needs and determine the right level of coverage:


  1. Evaluate Your Current Expenses: Start by calculating your monthly expenses, including mortgage or rent, utilities, groceries, transportation, insurance premiums, debt payments, and discretionary spending. This provides a baseline for understanding the minimum amount of income needed to maintain your current lifestyle.
  2. Assess Your Income Sources: Consider all potential sources of income, including salary, bonuses, investment returns, rental income, and spouse/partner income. Determine how much of your total income would be lost if you were unable to work due to a disability.
  3. Understand Your Existing Coverage: Review any disability insurance coverage provided by your employer, including short-term and long-term disability benefits. Understand the extent of coverage, waiting periods, benefit periods, and any limitations or exclusions.
  4. Calculate the Gap: Identify the shortfall between your current expenses and the income you would receive from existing disability coverage and other income sources in the event of a disability. This gap represents the amount of additional coverage needed to maintain your standard of living.
  5. Consider Future Needs: Anticipate any future changes in expenses or income that may affect your financial situation. For example, if you plan to start a family, purchase a home, or retire in the near future, factor in these considerations when determining your coverage needs.
  6. Assess Risk Tolerance: Consider your risk tolerance and financial resilience in the face of a disability. Are you comfortable with a lower level of coverage and the potential need to dip into savings or rely on other sources of support? Or do you prefer to mitigate risk by securing more comprehensive coverage?
  7. Consult with a Financial Advisor: Seek guidance from a qualified financial advisor who specializes in insurance planning. An advisor can help you navigate the complexities of disability insurance, assess your individual needs, and recommend appropriate coverage options tailored to your situation.
  8. Review and Adjust Regularly: Life circumstances can change, affecting your financial needs and priorities. Regularly review your disability insurance coverage in conjunction with your overall financial plan to ensure it remains adequate and aligned with your goals.


By following these steps and consulting with a financial advisor, individuals can make informed decisions about the amount of disability coverage that is sufficient to protect their financial well-being in the event of a disability.



Disclosure: All opinions expressed in this article are for general informational purposes and constitute the judgment of the author(s) as of the date of the report. These opinions are subject to change without notice and are not intended to provide specific advice or recommendations for any individual or on any specific security. The material has been gathered from sources believed to be reliable, however Merriman cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source.  Merriman does not provide tax, legal or accounting advice, and nothing contained in these materials should be taken as such. To determine which investments may be appropriate for you, consult your financial advisor prior to investing. As always please remember investing involves risk and possible loss of principal capital and past performance does not guarantee future returns; please seek advice from a licensed professional.

P.S. Don't LET YOUR FRIENDS MISS OUT. Share this article:

By Merriman Wealth Management, Wealth Advisor

At Merriman, we manage your wealth so you can lead your best life. We take care of the financial planning and investment management, so you can deal in more possibilities and have the space you need to dream big.

Because it’s time to stop asking "What should I do?" and start saying, "This is what I could do."

Articles Straight to Your Inbox

Subscribe to Merriman's Envision Newsletter to receive in-depth articles and expert commentary, delivered monthly to your inbox:

"*" indicates required fields

This field is for validation purposes and should be left unchanged.

By submitting your information, you consent to subscribe to Merriman's email list so that we may send you relevant content from time to time. Please see our Privacy Policy.