Do You Really Need Disability Insurance in Your 20s or 30s?

Disabilities are something we tend to associate with old age. Young adults might joke about their older friends waking up with back pain — without realizing that it could be them sooner than they think. (Speaking from experience, the memes about getting back pain when you turn 30 are true.) So, is long-term disability insurance worth it for young adults? Or can you just wait to get it later when the risk feels more real?

Because disabilities don’t wait for a milestone birthday, buying young could be one of the smartest financial moves you make.

How does long-term disability insurance protect you?

Long-term disability insurance pays a replacement salary every month if you are disabled from your job for longer than the elimination period (also referred to as a waiting period). This monthly benefit is paid every month until you either return to work full time, or if you are never able to return to work, until age 65. 

For high-income professionals, this protection is essential. Think of a dentist or an orthopedic surgeon who loses the use of their hands and can no longer operate. They have highly specialized educations that require a lot of time and money to get, which leads to generally one highly specialized and high-earning career. If the surgeon can no longer operate, what occupation could they easily switch to that has the same earning potential of $400,000 a year? 

I’ve found that individuals in these high-earning careers are highly motivated and may be well-positioned to pivot and start a new business. However, the problem is how long would that take — and how would they pay the bills in the meantime?

Disability insurance for young adults in their 30s

Let’s break down our surgeon Greg’s finances. He’s in his 30s and takes home $22,000 each month after taxes. He’s also got big responsibilities to pay for each month:

• $6,000 mortgage
• $500 on utilities (power, water, cell phone bill, etc.)
• $2,000 for daycare for his two children
• $3,500 for transportation
• $1,500 for food
• $1,000 for entertainment
• $500 on clothes
• $2,000 on healthcare 

Do you see the problem here? Greg has $17,000 in mostly fixed expenses — and that isn’t counting the $5,000 per month he puts into savings, which is more than many Americans. 

Even with a six-month emergency fund, Greg couldn’t afford to be out of work for long before having to worry about liquidating retirement accounts or other assets. Is six months enough time to create an entirely new career with that amount of earning potential? Most likely not. 

This is where long-term disability for young adults could fill in the gap. Typically, it covers up to 60% of pretax income. If Greg increased his policy prudently like he should, his policy would cover him for $20,000 per month of benefits, tax free. This means he doesn’t have to change his lifestyle at all. 

And on top of that, his disability policy is true own-occupation, which means he is allowed to work in another career if he wants to, and he can still collect that benefit. Now, he can work and grow at a pace that’s more comfortable for him, instead of grinding like his life depends on it.

The case for disability insurance coverage in your 20s

Let’s rewind back to when Greg was a resident physician in his 20s. Residents are infamously underpaid and overworked. During residency, let’s say Greg is making $72,000 per year and is in his first year of residency. Many of those future expenses are just a twinkle in his eye at this point. Why should he purchase long-term disability insurance to protect kids and a house that he doesn’t even have yet, and might not even know he wants?

Because the risk isn’t about what you have — it’s about what you’re building. Let’s take a closer look…

To start, Greg has student loan debt. Suppose he finished medical school with $200,000 in student loans. This debt on its own isn’t a bad thing; it was a tool Greg used to gain access to a much higher future income, and he’ll have no trouble paying his loans. One of the worst possible things to happen to Greg would be if he didn’t get to complete his residency and earn that future salary. Imagine having to start over at this point with a negative net worth, a highly specialized education that might not transfer to many other careers, and dealing with self-comparison to your peers. 

Residency programs highly encourage their residents to purchase disability insurance for this exact reason. A typical residency policy allows for a $5,000 monthly benefit and likely costs Greg between 1% and 4% of his annual income. Now, if Greg were to become disabled permanently, he’d have a guaranteed tax-free annual income of $60,000. 

Combine that benefit with the salary from whatever career he transitions to, and that’s a very respectable standard of living. 

The benefit isn’t limited to just $5,000 per month either. Assuming he added the inflation protection rider (also called the cost-of-living adjustment rider) on his policy, the insurance company increases his $5,000 a month benefit by 3%, compounding every consecutive year that he can’t return to orthopedic surgery. By year 20 of his disability, his policy is paying him $9,000 a month! This means the policy will continue to be relevant financially.  

Benefits of purchasing disability insurance as a young professional

Besides just protecting your current self and your future finances, there are significant financial benefits to purchasing disability insurance as a young adult:

• Permanent discounts: If Greg bought a long-term disability insurance policy while he was a resident, he’d likely get at least a 20% resident discount from the insurance company. That applies not just to the premiums he’s currently paying, but also to any increases in coverage he purchases as an attending. This discount saves Greg tens of thousands of dollars in premiums over the lifetime of his policy.
• Locked-in rates: By buying younger, you also lock in your age rate. For both disability insurance and life insurance, premiums go up every year the applicant gets older if they haven’t purchased a policy yet. And the best part, those premiums stay the same from when you bought the policy. So, if you bought it in your 20s, you’re paying way less than someone who bought it in their 40s, even if there isn’t a resident discount for you.
• Fewer health issues means better coverage: In my opinion, this is one of the most important reasons to apply while you’re young: you’re less likely to have preexisting medical conditions. This means you're more likely to qualify and get better protection.

Most disability policies require medical underwriting. If you already have a significant medical condition, the best-case scenario is that the insurance company excludes it — meaning they won’t pay if you become disabled because of that condition or its treatment. For example, if you’ve been diagnosed with depression or anxiety, the policy may no longer cover mental health claims.

The worst-case scenario? If you have too much going on medically, the insurance company will decline to offer you coverage. Unfortunately, this is usually the group of people who most need disability insurance. By locking in your policy as a young professional, you are drastically decreasing the odds that it will happen to you.

So yes, you can wait to buy disability insurance. But when you apply earlier, you’re more likely to qualify for better coverage, lower rates, and options that may not be available later.