Disability Insurance Finder

Disability insurance can replace between 40% to 80% of your monthly income if you can’t work because of a qualifying illness or injury. If approved, your policy can pay out anywhere from three months to social security retirement age depending on if you have a short-term disability policy or long-term disability policy.

What are the two types of disability insurance?

You pay a monthly premium in exchange for the reassurance that if you suffer a qualifying disability, your insurer will pay out a weekly or monthly percentage of your paycheck. The percentage of your paycheck you receive, which types of disabilities are covered and for how long depends on which type of disability coverage you purchase.

• Short-term disability insurance (STD) typically replaces 60% to 80% of your paycheck for three months to a year. It’s best for those who don’t have any emergency savings to fall back on.
• Long-term disability insurance (LTD) usually replaces 40% to 60% of your paycheck for 2, 5 or 10 years, or until you retire. It’s best for those who don’t have substantial savings and are the sole breadwinner of their family.

Does disability insurance cover coronavirus?

Yes, most disability policies will cover lost work after getting the coronavirus. However, your policy might not cover you if you:

• Get the coronavirus before applying, which is considered a pre-existing condition
• Don’t have a doctor’s diagnosis
• Can work your normal job while recovering
• Recover before the waiting period for getting payments is over
• Need your full salary—typical payouts for a short-term policy are between 60 to 80% of your income

How much is disability insurance?

The average cost of a long-term disability insurance policy is 1-3% of your annual income. If you earn $65,000 a year, you might pay between $650 and $1,950 a year.

However, your premium is based on a variety of factors, including your coverage, disability benefit, waiting period, type of job as well as your health and address.

Is disability coverage worth it?

If you don’t have enough savings to cover your daily expenses for a few months, you might need disability insurance.

How does disability insurance work?

Disability insurance works by replacing part of your income for approved disabilities after you complete the elimination period, also called a waiting period.

The elimination period is the length of time you’re required to wait before you can get disability payments. Once your wait is done, you’re eligible to collect disability payments during the benefit period.

The elimination period usually ranges from one to 90 days for short-term disability insurance or seven to 720 days for long-term disability. The benefit period may last 30, 60, 90, 180 or 365 days for STD, and until you reach a certain age or set number of years for LTD.

What types of disabilities are covered?

The types of illnesses or injuries that qualify for payouts depend on your insurer and the type of disability insurance. But these examples can help you know what to expect:

What happens if I’m disabled but can still work?

The answer lies in your insurer’s definition of disability and whether you can work at all. There are two types of plans:

• Own-occupation disability insurance pays out if you can’t work in your usual occupation, even if you can work a different job.
• Any-occupation disability insurance pays benefits if you can’t perform any job. To qualify, you need to prove you don’t have the physical or mental capacity to work at all.

Which one should I pick?

Own-occupation policies provide the most comprehensive disability insurance coverage, but they tend to cost more than any-occupation policies.

Any-occupation policies can help if you need low premiums and only want coverage for severe disabilities.

If a doctor suffers a hand injury, an own-occupation policy may pay 60% of their $10,000 monthly income. But an any-occupation policy wouldn’t pay at all if they could work as a receptionist making $2,500 a month.

Where can I get disability insurance?

If you’re sold on the idea of securing a replacement paycheck if you can no longer work, you can do so in three ways:

• Check for coverage through your employer. In California, Hawaii, New Jersey, New York and Rhode Island, employers are required legally to offer short-term disability plans to employees.
• Buy an individual policy. The major benefits of this option are that you can customize your elimination and benefit periods and can take the coverage to any job.
• Go through a professional association. Some professional associations partner with disability insurance companies to offer policies at discounted rates.

How do I save on disability insurance?

To cut down on your premium, you can:

• Increase your elimination period. A waiting period that’s 90 days or longer can lower your premium, but you may need extra savings or a short-term policy while you’re waiting for benefits.
• Decrease your benefit period. If you choose to get payments for a shorter time, your premium will go down. For a guideline, the average disability lasts three years.
• Reduce your monthly benefit. If you can manage with less than 60% to 70% of your usual income, you could lower your monthly benefit payment. But keep costly disabilities in mind.

What should I watch out for?

When purchasing your policy, you’ll want to make sure you fully understand your benefit options and exclusions before committing to a policy. Here are some things to keep an eye out for:

• Waiting period. Make sure you know how long you can go without your income or a disability insurance payout before choosing a waiting period.
• Exclusions. Understand any conditions or situations that your insurance won’t cover. Also, consider waiting periods before pre-existing conditions will be covered.
• How to file your claim. Find out how you’d file a claim with your insurance company and the information you’ll need to prove your disability.
• Denials and appeals. Talk with your disability insurer to find out the appeals process if a claim gets denied.

Your legal rights under the ADA

Alternatives to disability insurance

Disability insurance might be an option if your careers would be limited by a disability. However, it’s not right for everyone. You might instead rely on:

• Life insurance
• Workers’ comp
• Social Security Disability Insurance (SSDI)
• Self-insurance

Does life insurance cover disabilities?

No, life insurance policies don’t cover disabilities. That means you won’t get a payment if you become fully, partially or temporarily disabled.

However, you can add a disability rider to your policy that would waive your premiums for a qualifying disability until you can work again.

Do I need life insurance and disability insurance?

These policies serve different purposes, so it depends. Disability insurance is designed to protect your income in case you get ill or injured and can’t work for a period of time — so it benefits you (and anyone you support) during your lifetime. On the other hand, life insurance is primarily meant to replace your income when you die. With most policies, you won’t be able to access monetary benefits while you’re alive, so view it as a financial safety net for your family and loved ones in case you pass away prematurely.

If you have financial dependents who rely on your income to survive, it’s worth investing in both disability and life insurance.

Bottom line

Disability insurance pays benefits if you become disabled and can’t work, though short- and long-term policies offer different elimination and benefit periods.

Explore your disability insurance options from a variety of companies.

Frequently asked questions about disability insurance

• Who needs disability insurance?

  You may want disability insurance if you’re in one of these situations:

  • You have dependents whose lives would be greatly affected by your disability
  • You don’t have substantial savings to replace lost income or
  • You don’t want to touch other savings if you can’t work
  • You have debt like a mortgage, student or personal loan
  • You need a backup childcare plan for stay-at-home parents

• Can I get coverage for multiple disabilities?

  Your coverage may be affected by the types of disabilities you have and when you receive those disabilities. A few situations can happen:

  • You have both long- and short-term disabilities. Let’s say you suffer from both long- and short-term disabilities but only bought a long-term policy. Your insurer will pay based on the long-term disability.
  • Multiple conditions qualify as a disability together. For Social Security disability, many conditions don’t qualify by themselves. But they may be considered a disability when listed on your claim together.
  • You’re diagnosed with a new disability. Insurers may allow you an extended benefit period, but this is offered on a case-by-case basis. Be prepared to give a strong argument and medical proof.

• Do states offer disability insurance?

  California, Hawaii, New Jersey, New York, and Rhode Island offer government-run disability insurance, replacing part of your income for illnesses, injuries, pregnancy complications or childbirth recovery.

  Compare your eligibility, potential payouts and the illnesses covered from your state program before buying your own policy.

• What's not covered by disability insurance?

  The exclusions can vary by insurer, but look at your policy for these common exclusions or limitations:

  • Pre-existing conditions
  • Conditions caused by mental or nervous issues
  • Conditions caused by substance abuse, including prescription drugs
  • Normal pregnancy
  • Workplace injuries
  • Intentional injuries
  • War or acts of war