Disability Insurance: What It Is & When You Need It



What Is Disability Insurance and What Does It Cover?

Disability insurance is a form of individual insurance that provides financial benefits to individuals who become disabled and can’t work. This coverage can be purchased as an independent policy or provided through an employer or labor union-sponsored plan. Disability insurance covers expenses associated with employee disability, including lost wages and medical expenses. 

There are two different types of disability insurance: long-term and short-term. Short-term disability insurance covers an employee’s lost income for up to three to six months, while long-term coverage tends to kick in after about three months and can last for years or even the rest of your life.

Many disability policies pay partial replacement income for part-time employment, and long-term disability policies often include additional benefits that cover educational costs and job training assistance. 

Additionally, most disability policies have exclusions for pre-existing conditions or activities considered dangerous by the insurer, so review the details of your policy before making any decisions about coverage.

How Much Does Disability Insurance Cost?

Disability insurance coverage can be a crucial safety net for any individual or business, but determining the cost of disability insurance can be difficult. Premiums are typically calculated based on occupation, income, and other factors, such as the amount of coverage purchased and the duration of benefits. 

For self-employed individuals and small businesses, disability insurance premiums may typically range between 1% and 3% of their annual income. Additionally, given their risk profile, certain types of businesses may pay higher rates than others – for example, contractors typically pay more as a percent of their income than consultants. 

Ultimately, disability insurance costs vary depending on the type of policy and its terms. However, regardless of price point or risk profile, disability insurance often proves invaluable when needed most and is a valuable asset for all individuals and organizations.

When Do You Need Disability Insurance, and What Are the Benefits of Having It?

Disability insurance can be an essential part of financial protection, as it provides benefits if you suffer an illness or injury that prevents you from working for some time. It is particularly important for those who are self-employed, as federal disability benefits do not cover them if they get hurt or sick and can’t work. 

If the policyholder becomes disabled, disability insurance also helps maintain your lifestyle and prevent depleting savings accounts during long periods of absence from work. Most importantly, disability insurance policies give policyholders peace of mind, knowing they are covered in case of an unexpected illness or injury.

How to File a Claim for Disability Insurance and What to Expect During the Process

When you buy disability insurance, your provider will explain what to do if you need to file a claim. If you do become disabled and need to file a claim, gather all relevant information, including a diagnosis from your doctor and any other records of the event that led to your disability. 

Once your disability insurance claim has been received, it may not be approved immediately. The disability review process is extensive and involves verifying medical records, disability status, and other data. During this time, you should expect to receive periodic updates about the status of your disability claim approval. 

If your claim is denied, you may need to undergo an appeal process involving additional steps. The important thing is to follow instructions from your provider and stay up-to-date with communication so you can get through the filing process as quickly and efficiently as possible.

Disability Insurance FAQs

What is the waiting period for benefits?

The waiting period for benefits varies depending on the type of disability insurance policy purchased. In many cases, the initial waiting period may start as soon as 14 days after filing a claim. Some policies also pay partial benefits during the pre-determined maximum waiting period. In addition to the initial waiting period, before benefits become available, there may also be a maximum waiting period in which all or some benefit payments are made. 

What are the types of disability insurance?

There are five main types of disability insurance: short-term disability insurance, long-term disability insurance, mortgage disability insurance, supplemental disability insurance, and social security disability insurance. Long-term disability insurance provides coverage for an extended period, often until retirement age. In contrast, short-term disability insurance covers a shorter period, usually up to six months. 

Who needs disability insurance the most?

If you have little savings and rely on your income to pay your monthly bills, disability insurance is crucial. Your financial stability could be at risk if you can’t work due to an unexpected injury or illness. Disability insurance is essential for those in physically demanding roles, parents with young children, and individuals with recurring injuries.

Disability insurance is an important type of coverage in case you are ever unable to work due to an injury or illness. It can help you cover your living expenses and maintain your lifestyle while you are out of work. While the cost of disability insurance varies depending on many factors, it is generally affordable and easy to get – even if you’re a freelancer. 

In fact, we’ve partnered with Avibra to ensure our users can get access to critical disability coverage. We offer our newsletter subscribers $10,000 in basic AD&D insurance coverage – coverage that you can double for just $1 per week.