What is Disability Insurance?

Disability insurance is like a safety net. It gives you money if you get sick or hurt and can’t do your job. You might not think it, but many people need this help. 

Many times, people get too sick to work because of things like heart problems or arthritis, not just because of accidents. Also, it’s important to know that worker’s compensation only covers some of these issues.

Some jobs give you short and long-term disability benefits. If something bad happens and you can’t work, short-term benefits immediately give you money. 

If you can only work for a short time, long-term benefits can help. Plus, you can choose to pay for extra coverage. This could give you more money on top of what your job offers.

Here’s more about the kinds of disability insurance and what they cover.

What is disability insurance? 

Disability insurance gives you some of your income if you get too sick or hurt to work. Some jobs give short-term and long-term disability insurance, but buying an extra can give you and your family more money to pay bills and buy things you need daily.

If your job doesn’t give you disability insurance or doesn’t give enough, you can buy it from an insurance company or use an agent or broker.

Once you sign up, you pay a fee every month. Then, if you get hurt or are too sick to work, you tell the insurance company so you can start getting money.

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What does disability insurance cover? 

All disability insurance covers some of your pay, but what’s included and what’s not depends on the type of insurance (short-term vs. long-term), how they define “disability,” and your policy’s specifics. 

Here are some conditions that disability insurance companies and Social Security look at when deciding if they’ll cover you:

  • Cancer
  • Inborn disorders
  • Digestive problems
  • Hormone problems
  • Genitourinary problems
  • Heart problems
  • Blood problems
  • Immune system problems
  • Injuries like broken bones, sprains, and strains
  • Mental health problems
  • Musculoskeletal problems
  • Nervous system problems
  • Pregnancy (short-term disability)
  • Breathing problems
  • Skin problems
  • Problems with your senses and speech

Your disability coverage also depends on whether your disability is partial or full.

Partial disability: You might get this as part of a disability plan or workers’ compensation plan. You’re not fully disabled but can’t do everything your job requires. 

This is often because of illness or an injury at work. You can go back to work but can’t do your old job or can only work part-time. Examples include losing sight in one eye, hurting your knee, or getting nerve damage.

Total permanent disability: This coverage helps when you have a mental or physical disability that stops you from doing your job completely and permanently. 

Your insurance company will explain what counts as a total permanent disability, affecting the coverage you qualify for.

What doesn’t disability insurance cover? 

Disability insurance doesn’t cover medical care or long-term care, and it won’t give any benefits if you’re older than 65.

Other things it doesn’t cover include:

  • Disabilities caused by crime, war, or planning war
  • Cosmetic surgery, unless it’s connected to an injury or illness
  • Injuries from being in a riot
  • Hurting yourself on purpose
  • Injuries from military service in a country at war

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Types of disability insurance 

There are two main types of disability insurance: short-term and long-term. There’s also Social Security disability insurance.

Short-term disability insurance: This covers you if you’re sick or hurt and can’t do your job for a short time. People often file short-term disability claims for pregnancy, musculoskeletal problems, injuries, digestive problems, and mental health problems. Once you file a claim, you’ll get weekly money for 13, 26, or 52 weeks.

Long-term disability insurance: Unlike short-term disability, long-term disability pays monthly, and you can buy coverage for a specific number of years. 

People often file long-term disability claims for musculoskeletal problems, cancer, injuries, mental health problems, and blood flow problems. 

Short-term disability usually pays more of your income than long-term, but long-term pay for longer. This kind usually replaces 60% to 80% of your income.

Social Security disability insurance: SSDI pays people who are too sick or hurt to work as long as they’ve paid Social Security taxes and have worked enough. SSDI only covers disabilities that are total, long-term, and severe. Even if you qualify, you’ll have to wait five months before you can get benefits.

Where to get disability insurance?

You might be able to get disability insurance through your job. If your job offers disability insurance, they might help pay your premiums. But, job-based disability insurance might not be enough depending on your needs. 

If you want private disability insurance, you can talk to the insurance company directly or use a broker to find the best coverage.

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Things to know when buying disability insurance 

When you buy a disability insurance policy, you need to understand five important things:

  • Waiting period: How long you must wait to get benefits after filing a claim.
  • Definition of disability: How the insurer defines a disability.
  • Benefit period: How long you’re covered.
  • Premium: How much do you pay for coverage?
  • Benefit: How much money would you get each month if you become disabled while your coverage is active?

How much does disability insurance cost? 

If you decide to purchase your own disability insurance policy, you’ll likely have to spend about 1% to 3% of your annual earnings on it. But if you ever need to use the policy, it will usually cover about 50% to 80% of your income.

The exact amount depends on your policy type, how long you’re covered, how much benefit you get, and how the insurance company evaluates you.

Like life insurance, your age, health, lifestyle, and other factors affect your premiums. The younger and healthier you are, the less risky you are to the insurer. 

Your job also plays a big part in setting your premiums. If your job is considered more dangerous, like construction work, you’ll pay more than someone with a less risky job, like a desk job.

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