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Guide to disability insurance benefits
Your benefits, waiting period and taxable income vary between private and government insurance.
You can claim private disability insurance benefits at half or two-thirds of your regular income, depending on whether your disability policy is short- or long-term. The claims process is fairly straightforward, and you can get payments deposited directly to your bank account. However, federal disability benefits only apply to long-term situations and offer a flat rate based on your work and income history.
What's in this guide?
Short-term disability insurance benefits
Short-term disability (STD) insurance replaces a percentage of your weekly income for temporary periods you can’t work because of a qualifying disability. What to expect with short-term disability benefits:
Benefits received
You can expect the benefit to pay 60% to 80% of your regular income for three months to one year. Payments come after a waiting period, also called the elimination period, and can last between one and 90 days.
What’s covered
Temporary disabilities that may qualify for short-term benefits:
- Broken bones
- Illnesses with long recovery periods
- Joint or bone disorders like arthritis
- Digestive problems
- Pregnancy or maternity leave, in some cases
Long-term disability insurance benefits
Long-term disability (LTD) benefits replace a percentage of your monthly income for qualifying disabilities that prevent you from working for a prolonged time. What to expect with long-term disability benefits:
Benefits received
Expect to receive benefits between 40% and 60% of your usual income. Depending on the policy, your benefit period can last anywhere from two to 10 years or until retirement age. The elimination period can range from seven to 720 days, although 90 days is common.
What’s covered
Qualifying disabilities under this policy tend to last a long time or even for the rest of your life. Those include:
- Chronic bone or joint disorders like osteoarthritis or back pain
- Accidental injuries, such as from a car accident
- Heart or circulatory problems
- Prolonged mental illness, such as PTSD
- Cancer, in some cases
Disability insurance vs. Social Security Disability
Social Security Disability Insurance (SSDI) acts as long-term disability coverage for those who can’t work at all for an extended period. However, you can claim disability benefits on a private policy earlier than with government benefits.
How private and government benefits compare:
| Type of insurance | Criteria | Conditions covered | Benefit amounts | Benefit period | Elimination periods |
|---|---|---|---|---|---|
| Individual disability | Most working individuals qualify. |
|
|
|
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| Social Security disability | Age 18 or older who meet income or work requirements | Any disabling condition expected to last 12 months or result in death | Average of $1,260 monthly | Until you can go back to work, the disability is cured or up to age 65 | 5 months |
| State short-term disability | Specific work length or income criteria like working for 6 months | Maternity leave or disabling conditions lasting longer than a week | About 60% of your current income | Until your disability is cured, or up to 26 or 30 weeks typically | 7 days |
Which states have disability programs?
Only a handful of states offer short-term disability programs. Those include California, Hawaii, New York, New Jersey, Maryland and Rhode Island. The District of Columbia will implement paid family leave in July 2020.
Can I receive Social Security and private disability insurance benefits?
Yes, you can receive both SSDI benefits and benefits from a disability insurance policy. But, your private disability insurance typically reduces the amount of payments by the amount you receive from Social Security.
For example, if you’re eligible to receive $2,000 a month from a long-term disability policy but also qualify for $500 from SSDI, your LTD policy will pay only $1,500 a month. However, your reduction of payments won’t begin immediately, it’s common to see a reduction after six or 12 months of receiving benefits.
The benefit of using SSDI is that you can qualify for Medicare after receiving disability benefits for 24 months. But by using an LTD policy, you get higher monthly benefits and can receive payments earlier than SSDI.
Compare disability insurance companies
What is the application process for disability insurance?
Follow a few steps to apply for an individual disability policy:
- Choose which company to use. Research short-term disability companies or use a comparison site like Finder to view a company and its benefits side by side with its competitors.
- Apply online or by phone. Many companies let you start a free quote online, and you can choose to buy the policy after receiving your quote. Otherwise, you might need to call customer service.
- Fill out your paperwork. Give details about your personal information, including your name, address, date of birth and answer questions about your health.
- Choose your coverage. Choose the benefit amount you want to receive each month and the waiting or elimination period. Benefits can range from $100 to $20,000 monthly — depending on your salary, and the elimination period can range from 30 to 365 days.
- Start your policy. Rest assured that you have income protection if you suffer from a qualifying disability.
How do I make a claim for individual disability insurance benefits?
Every disability insurer has its own method for processing claims. You’ll likely need a statement or proof of your disability and inability to work from both your doctor and employer.
Steps to claim your disability benefits:
- Initiate the claim. Access your company’s online customer account. Otherwise, call the claims customer service.
- Describe your temporary disability and the events leading up to it. You might include how long you’re expected to be unable to work.
- Prove your diagnosis. Give the company your doctor’s contact information or have your doctor send a statement. Most insurers will request required information from you, with detailed instructions on what you need.
- Show you’re unable to work. Give your employer’s contact details or have your manager verify that you can’t work at your normal job.
- Wait for approval. A representative will let you know whether you qualify for disability benefits.
- Set up the payment method. Some companies set up direct deposits to your bank account for monthly payments. Otherwise, verify how and when you’ll receive your check.
How do I claim Social Security disability benefits?
You can claim your Social Security disability online, by phone or in person. How to apply for benefits using each method:
- Online. If you think you’re eligible, you can apply online for Social Security disability for faster claims processing. You’re eligible to apply online if you:
- Are between ages 18 and 65
- Have never married
- Aren’t blind
- Are a US citizen in one of the 50 states, the District of Columbia or on the Northern Mariana Islands
- Haven’t applied for or received Social Security benefits in the past
- Are applying for Social Security disability at the same time as your Social Security income
- By phone. Call 800-772-1213 Monday through Friday from 7 a.m. to 7 p.m. If you have a hearing disability, you can call 800-325-0778.
- In person. Contact your local Social Security office to schedule an in-person appointment.
What documents do I need to apply?
To get Social Security disability benefits, you’ll need to attach several documents to your application:
- Birth certificate or proof of US citizenship
- US military discharge papers, if applicable
- Last year’s W-2 or self-employment tax return
- Medical proof of your diagnosis, such as doctor’s statement or test results
- Pay stubs, settlements or proof of other compensation like workers’ comp
Will I pay taxes on disability insurance benefits?
It depends on the type of policy you have and whether you contributed pre- or post-tax dollars. Here’s when you might need to pay federal taxes on your benefits:
| Type of policy | Your contribution | Taxable income |
|---|---|---|
| Private individual policy | Post tax | Above $25,000 for individuals or $32,000 for households |
| Employer-sponsored policy | Either pre or post tax | Taxable if you or your employer makes pre-tax contributions |
| Social Security disability | Contributions through taxes | 50% taxable if you make above $25,000 for individuals, $32,000 for households 85% taxable if you make $34,000 for individuals or $44,000 for households |
In addition, you might get taxed at the state level. These states apply full or partial income taxes to Social Security disability benefits:
- Connecticut
- Colorado
- Kansas
- Minnesota
- Missouri
- Montana
- Nebraska
- New Mexico
- North Dakota
- Rhode Island
- Utah
- Vermont
- West Virginia
Bottom line
Government disability benefits work well for those needing long-term disability coverage and those who can’t pay for an individual policy. Private disability works well if you need higher income payouts and shorter waiting periods.
To find the best fit, compare private disability insurance with benefits at the right price point for you.
Frequently asked questions about disability insurance benefits
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