Key takeaways
In the US, disability insurance is the primary way to replace income when an illness or injury prevents you from working, with short- and long-term policies helping provide income protection over different periods.
A comprehensive income protection strategy can combine disability insurance with supplemental coverage, such as critical illness, accident, and hospital indemnity insurance.
The amount of disability insurance you need depends on factors such as your income, savings, expenses, and whether others rely on your income.
Government programs such as Social Security Sisability Insurance (SSDI) and Supplementary Security Income (SSI) can provide income protection, but eligibility requirements and benefit limitations may make private disability insurance an important part of a broader strategy.
Income protection needs can change as your financial circumstances evolve, making major milestones such as starting a new job, buying a home, or adding family members a good time to review your coverage.
Loss of income insurance is coverage that helps replace part of your income if an injury or illness keeps you from working. In the US, this protection usually comes from disability insurance — often short and long term — along with other products and strategies that can help protect your finances when a paycheck stops. Since many people and families may not have enough savings to get through an extended period without any income, having a plan to pay your bills and help maintain your lifestyle while you recover can make a major difference.
You may have heard about Income Protection Insurance or IPI. It’s a specific type of insurance designed to help provide ongoing income replacement — typically between 50% and 70% of your gross income — in the event that an injury or illness prevents you from working.1 That coverage, which may also be called permanent health insurance or PHI, is only available in certain countries, such as the UK, Australia, New Zealand, and South Africa. And while it’s not offered in the US, individuals, families, and employers can use disability insurance and other benefits to help create similarly comprehensive income protection. This article will help you better understand:
What's included in an income protection strategy, including short- and long-term disability insurance, supplemental health coverage, and government benefits that can help replace income and protect your finances.
How life insurance and financial practices, like estate planning, can help provide income protection for loved ones.
When to consider adding or adjusting disability policies.
What does an income protection strategy include?
In the US, the primary way to get income protection is through short-term disability insurance and long-term disability insurance.
Short-term disability insurance (or STD) typically replaces 40% to 70% of your income for three to six months (and not more than one year).2 Benefits usually start within one to two weeks of a qualifying illness or injury. Many employers offer this type of coverage as a voluntary (employee-paid) workplace benefit because, unlike mandated Workers Compensation, which only covers job-related illness or injury, an STD policy pays benefits for all sorts of covered issues regardless of where they happen. So, for example, if a non-work-related car accident or medical issue kept you out of work for a few months, you could receive STD benefits but not Worker’s Compensation.
Long term disability insurance (or LTD) can replace a similar portion of your income for much longer periods. Depending on the specifics of the policy, some plans provide coverage for two or five years, while others may last until retirement age (unless you recover sooner). LTD is sometimes offered as a workplace benefit, but many people choose to buy an individual policy from a disability insurance provider, such as Guardian. And it's important to know that compared to STD, long-term disability insurance typically has a much longer waiting period: benefits usually start after 14 days to two months, though many claims are paid three to six months after the claim is submitted.
A long-lasting disability could leave you without income replacement for months — or even years. But if you have both types of disability insurance, they can work together to provide ongoing income benefits to help pay your bills and support your family’s lifestyle while you recover.
The high likelihood of disability
While disability might sound like a rare occurrence, the reality is that about a quarter of today's 20-year-olds will become disabled before reaching full retirement age.3 For example, pregnancy and broken bones are examples of conditions that can qualify as a short-term disability (depending on the terms of the policy). Potentially longer disabling conditions can include common but curable cancers or musculoskeletal disorders — even back pain that keeps a person from performing work duties. Mental health conditions are also an increasingly common driver of disability: mental health-related leaves have roughly tripled since 2019, and 42% eventually convert from short-term to long-term disability.4 That’s why it's so important to consider both types of disability insurance policies for income protection.
How much disability insurance do you need? The answer depends on factors such as your current salary, savings, and income needs. To estimate how much income protection makes sense, review your monthly expenses, how much income your household would actually need if you could not work, and how your tax situation affects take-home pay. For example, if you have family members who rely on your income to pay bills like mortgage and car payments, then you might want to consider more insurance than a single person with a substantial emergency savings fund.
Government benefit programs
If you’ve been paying Social Security taxes for at least 10 years, you may be eligible for federal disability programs such as Social Security Disability Insurance or Supplemental Security Income.5 These programs can help provide some income protection but are generally harder to qualify for and have more limitations than private disability insurance. For example, SSDI and SSI eligibility depends on having a disability that prevents you from any "substantial gainful activity," while a private disability insurance policy may use an “own occupation” definition and can provide benefits to those who can’t workf in their own profession, even if they could perform some other type of work.6 In other words, if you want income protection in case an accident or illness leaves you unable to do your current job — but not necessarily all jobs — then you may be better served by having private disability insurance. Also, government disability benefits tend to be somewhat limited — the average monthly SSDI payment as of May 2026 was just $1,634.78.7
Adding disability coverage doesn't have to be expensive. For example, you can expect a long-term disability cost of around 1 to 3% of your salary per year, which is substantially lower than Social Security withholding rates.8 And while long-term disability insurance premiums aren't usually tax-deductible, benefits are typically paid out income tax-free. This disability insurance calculator can give you a more specific sense of how much disability insurance could cost based on your income protection needs.
Other components of a comprehensive financial protection strategy
Disability insurance can be an important type of protection — specifically for your paycheck — but there are other things you can do to help protect family finances from the impact of costly medical issues. For example, consider getting critical illness insurance or other supplemental health coverage that is often offered as a workplace benefit.
Critical illness insurance works differently than disability insurance: Rather than paying monthly benefits to replace part of your paycheck, critical illness insurance provides a lump sum benefit in the event you're diagnosed with one of the many qualifying critical and serious illnesses, such as cancer, a heart attack, or Parkinson's disease. By contrast, disability insurance can provide ongoing financial support through benefit payments when a covered medical condition prevents you from working and replacing lost pay. Benefits are paid directly to you — not your medical provider — to use as needed. It can help you preserve savings or minimize debt in the event of a serious health condition, which in turn can help you focus on recovery instead of worrying about finances.
Many employers offer other types of supplemental health insurance products as well. Cancer insurance, for example, works much like critical illness insurance but with a narrower, cancer-only scope of coverage. Similarly, accident insurance can provide a lump sum benefit in the event of an accidental injury, and hospital indemnity insurance pays benefits for covered admissions and days of hospitalization in addition to medical coverage.
Of course, not all insurance products involve getting sick or injured. For example, government-mandated unemployment insurance can help provide income protection if you lose your job. But some employers also offer what's known as a Supplemental Unemployment Benefits Plan to further protect the finances of workers who get laid off.
Life insurance
If others depend on you for support—and you're concerned about protecting their income — then life insurance may be an important part of your strategy. A life insurance policy can provide several years of income replacement for less than you might think: A healthy 30-year-old female can get $1,000,000 of 10-year term life coverage for just over $1 a day.9
There are two main types of life insurance policies to consider: term life insurance and permanent life insurance. With term life, premiums typically cost less, but coverage is temporary: loved ones only get a death benefit if they pass away during the policy term. By contrast, with a permanent policy (such as whole life insurance), your beneficiaries get a lump sum payout even if you live into your 80s, 90s, or beyond.
Permanent life insurance policies can also provide additional benefits, like cash value that builds over time and can be accessed while you’re still alive.10 While accessing cash value can reduce your death benefit, it offers another option for financial protection: if you're unable to work, you can take a loan against cash value or even cash in part or all of your policy for needed funds.11
Many employers offer life insurance plans as an employee benefit at group rates. That can be a cost-effective way to start getting coverage, and if you decide you want more protection, you can get additional coverage as an individual.
Estate planning
Thinking about the future — and what happens after you’re gone — can be an important part of your family’s income protection strategy. That may involve getting life insurance to help pass assets on to family members, but there’s more to it. Estate planning can help define a strategy for handling your money and affairs if you become incapacitated or when you pass away — and taking steps to manage that now can help your loved ones gain greater financial protection.12 For example, just having a will can help reduce the risk of having your assets held up in probate court. Other estate planning tools, such as a trust, can define instructions for disbursing assets over time, such as paying for grandchildren's education or providing ongoing income for a family member with special needs.
Getting started
Creating an income protection strategy may be important to anyone with significant financial responsibilities, but certain times particularly may call for reviewing or adding to your protection plans:
Starting a new job: Carefully review your employee benefit and insurance offerings to see what kinds of coverage and features could enhance your financial readiness.
Buying a new home: As you add a big financial responsibility, like a mortgage, you may want to review your income protection strategy and see if you have enough coverage to keep up with essential household costs.
Adding new family members: Having children can increase your expenses, which is a good reason to consider reviewing your income protection strategy. And later on, having grandchildren is a reason to review your estate plan.
Experiencing significant financial changes: A big financial change like a promotion might lead you to add more income protection — after all, you’ll have more income to replace. If you’re self-employed, you may need coverage structured around personal income and, in some cases, business expenses needed to keep operations running. Conversely, if you find yourself working less as you near retirement, you may be able to reduce disability coverage if you have enough saved assets to live on.
Adding income and financial protection through the use of different types of insurance protection, thoughtful management of personal finances, and sound estate planning can help better prepare you to face the future and feel more confident about life. Not sure where to start? Consider getting help from someone who's helped others. A local Guardian financial advisor can listen to your concerns, tell you about different types of financial protection products, and tailor solutions to your specific needs and budget.
Frequently asked questions about income protection
Income protection insurance is a specific type of coverage offered outside the US that provides monthly benefit payments to replace part of your income if you can't work due to injury, illness, or other factors, like job loss. In the United States, short-term and long-term disability insurance can be used together — and in concert with other forms of coverage — to help provide similarly comprehensive income protection.
Disability insurance — also known as disability income insurance — is one form of income protection. However, income protection insurance — specifically in the context of the type of coverage offered outside the US — is not the same as disability insurance in the US. Some forms of income protection insurance, for example, may pay benefits in situations other than disability, like unemployment. That’s why other types of coverage may be needed by Americans who want comprehensive income protection.
