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This article was reviewed by Andrew Flueckiger, a member of the Finder Editorial Review Board and certified insurance counselor and licensed insurance agent in five states.
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.
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.
Yes, most disability policies will cover lost work after getting the coronavirus. However, your policy might not cover you if you:
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.
If you don’t have enough savings to cover your daily expenses for a few months, you might need disability insurance.
Consider disability coverage if you:
You might skip disability coverage if you:
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.
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:
Short-term disability | Long-term disability |
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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 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.
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:
To cut down on your premium, you can:
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:
The Americans with Disabilities Act (ACA) is a landmark law that aims to advance access and opportunities for those with physical and cognitive disabilities.
The law spells out people’s rights for employment, transportation, telecommunications as well as getting access to government space programs and private facilities.
The ACA assigns a federal agency to handle each of these rights, offering avenues for anyone with a disability who experiences discrimination.
Your legal rights under the ADA
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:
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.
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.
Worker’s compensation protects employees who get injured or sick due to their job. Meanwhile, disability insurance covers debilitating health conditions or injuries both on and off the job.
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.
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.
You may want disability insurance if you’re in one of these situations:
Your coverage may be affected by the types of disabilities you have and when you receive those disabilities. A few situations can happen:
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.
The exclusions can vary by insurer, but look at your policy for these common exclusions or limitations:
Katia Iervasi is a staff writer who hails from Australia and now calls New York home. Her writing and analysis has been featured on sites like Forbes, Best Company and Financial Advisor around the world. Armed with a BA in Communication and a journalistic eye for detail, she navigates insurance and finance topics for Finder, so you can splash your cash smartly (and be a pro when the subject pops up at dinner parties).
Learn which short- and long-term add-ons are free and why others might be worth the extra cost.
Finder analyzes the easiest and hardest states to get disability in America, rating the top 5 best and worst states for disability approval.
Getting a policy can be complicated, but it offers protection for you and your employees.
Which type of disability insurance you have influences how long it’ll take you to receive benefits. Find out how long you may have to wait.
If you’re concerned your group disability insurance won’t replace enough of your income if you experience a disability, you can buy supplemental disability insurance.
Get your loan payments covered when you experience a disability and can’t work, but with limited coverage.
Who long-term or short-term disability insurance works best for, and pros and cons to buying both.
Disability insurance typically pays out between 40% and 80% of your income, but will depend on the type of policy you have.
Short- and long-term disability insurance offers coverage for different amounts of time and replaces a different percentage of your income, but you can buy both if you can afford it.
You won’t be able to replace all of your income with disability insurance, but you can buy enough to cover your biggest monthly bills.
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