Disability insurance can cost a pretty penny. Monthly premiums average approximately 2-4% of a person's annual income, depending on the policy they wish to purchase. The first thing that has to be done, therefore, is to determine if you need coverage in the first place.

quickglossary A premium is an amount of money that is paid to an insurance company for a contract of insurance.

So, how do you know you need DI? Paul Tanti, an independent insurance broker, suggests asking yourself the following questions:

• Do you know where you'll get the money to pay the mortgage, visa or other bills if you suddenly become injured and can't go to work?
• Do you have a steady stream of income outside of your current job?
• How long could you carry on until you run out of money in the event that you become disabled and can no longer manage your business venture?
• What is your liability and commitment per month? How much will it impact your life and your business in the event that you become disabled?

Tanti says that these questions have to be considered carefully when deciding whether you should commit to a long-term disability policy. Chances are that if you come away with a feeling that your security net is not yet set in place, you'll need some form of coverage.

Introduction

What are the different types?