Guide to disability insurance benefits

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.

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:

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

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Name	Product	Coverage Amount	Benefit period	Waiting period	Own Occupation	Medical exam required
Policygenius Disability Insurance		$100 to $20,000	2, 5, or 10 years or until age 65 or 67	60 - 365 days	Yes	Depends on provider	Get matched with one of 15 top life insurance companies to find the best coverage and rates for you.	Go to site More Info	Compare	loading Fetching your data...
JRC Life Insurance		$500 to $20,000	2 year to lifetime	30 - 365 days	Yes	Yes	Compare policies up to $10 million from 45+ top insurance companies with the click of a button.	Go to site More Info	Compare	loading Fetching your data...
Breeze		$500 to $20,000	1, 2, 5, or 10 years or until age 65 or 67	30 - 365 days	Yes	No	Secure long-term disability insurance online by filling out an easy 10-minute application, even if you're a high income earner.	Go to site More Info	Compare	loading Fetching your data...

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What is the application process for disability insurance?

Follow a few steps to apply for an individual disability policy:

1. 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.
2. 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.
3. Fill out your paperwork. Give details about your personal information, including your name, address, date of birth and answer questions about your health.
4. 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.
5. 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:

1. Initiate the claim. Access your company’s online customer account. Otherwise, call the claims customer service.
2. Describe your temporary disability and the events leading up to it. You might include how long you’re expected to be unable to work.
3. 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.
4. 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.
5. Wait for approval. A representative will let you know whether you qualify for disability benefits.
6. 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:

In addition, you might get taxed at the state level. These states apply full or partial income taxes to Social Security disability benefits:

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

• Is the cost of a private policy worth it?

  Yes, because it can offer you peace of mind about a stable income. From a numbers standpoint, the return on investment depends on whether you make a claim. Long-term policies cost around 1% to 3% of your annual income and pay out up to 60%.

  So if you pay $1,200 a year for a policy but file a claim to receive payments for six months, the payout on a $40,000 income could be $8,000 to $12,000. You would still come out on top even if you paid for the policy for five years before filing a claim.

• What is the duration of disability insurance benefits?

  Short-term disability policies may pay out for three to 12 months. Long-term policies may pay out for two to 10 years, and some up to retirement age. Social Security disability pays out until the disability is healed or Social Security retirement kicks in.

• What is key person insurance?

  Key person insurance is a type of life or disability insurance policy that employers can purchase for employees who are crucial to the business’s income and function. Settlements go to the business to cover costs like hiring another employee or lost revenue related to that person’s job.