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.

2 main types of disability insurance

You’ll have the option of short-term coverage or long-term coverage, and which one you choose determines how often you receive payments and for how much.

• Short-term disability insurance (STD) typically replaces 60% to 80% of your paycheck for three months to a year in weekly payments. 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 in monthly payments. It’s best for those who don’t have substantial savings and are the sole breadwinner of their family.

Disability insurance costs

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 disability insurance works

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 disability insurance covers

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:

Why your policies definition of disability is important

How your policy defines the definition of disability determines whether you can receive benefits after a disability while still working a different job or if you’ll only receive benefits if you can’t perform any job.

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

3 ways to 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.

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

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.

Your legal rights under the ADA

Alternatives to disability insurance

Disability insurance might be an option if your career 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

Life insurance doesn’t cover disabilities, but you might still need it

Life insurance won’t cover your disabilities, which 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. If you have financial dependents who rely on your income to survive, it’s worth investing in both disability and life insurance.

What about Social Security Disability Insurance?

Social Security Disability Insurance (SSDI) is a government program that pays out if you suffered a disability that causes an “inability to engage in any substantial gainful activity” for medical reasons for at least one year.

Also, you must have worked jobs that pay into the Social Security program and meet its “disabled person” criteria, which includes severely limited mobility and a monthly income under $1,220.

If you’re one of the 65% of people who get denied SSDI benefits, you can appeal the decision. The process can be long and you may have to file several appeals.

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.