Dis­abil­i­ty insur­ance is a type of insur­ance cov­er­age that replaces a por­tion of your month­ly income in the event you are unable to per­form your work func­tions due to ill­ness or injury. This insur­ance gives both your­self, and those who are depen­dent on you and your pay­check, a sense of finan­cial secu­ri­ty while you are out of work. Let’s explore dis­abil­i­ty insurance.

Who Qual­i­fies for Dis­abil­i­ty Insur­ance and Why?

Accord­ing to the Social Secu­ri­ty Admin­is­tra­tion, about 1 in 4 adults, who are cur­rent­ly in their 20’s, will have some sort of dis­abling event in their life that will cause them to be out of work for at least 3 months before they hit retire­ment age. And, while most peo­ple think that dis­abil­i­ty insur­ance is most used by those with an injury due to an acci­dent, the major­i­ty of claims (90%) come from med­ical ill­ness­es. In fact, the most com­mon claims are relat­ed to can­cer, back pain, car­dio­vas­cu­lar dis­ease, injury, preg­nan­cy, and diges­tive disorders.

Types of Dis­abil­i­ty Insurance

There are two types of dis­abil­i­ty insur­ance than an indi­vid­ual can enroll in and one that is admin­is­trat­ed by the gov­ern­ment through the Social Secu­ri­ty Admin­is­tra­tion. First, there is short-term dis­abil­i­ty insur­ance. This type pays pay­check ben­e­fits for, as the name sug­gests, a short-term dis­abil­i­ty due to injury or ill­ness.  The time frame for these ben­e­fits is between 3–6 months and can cov­er between 40–60% of the participant’s income. Pur­chas­ing this type of insur­ance tends to be expen­sive and ben­e­fits usu­al­ly begin about 14 days after the qual­i­fy­ing incident.

Long-term dis­abil­i­ty insur­ance pays between 60–80% of the participant’s income and typ­i­cal­ly lasts until they recov­er from the injury or ill­ness or until a pre-deter­mined num­ber of years, for instance, until they are 65.  Ben­e­fits for long-term dis­abil­i­ty insur­ance usu­al­ly begin after a 90-day wait­ing time.

Social Secu­ri­ty Dis­abil­i­ty Insur­ance (SSDI) is admin­is­tered by the Social Secu­ri­ty Admin­is­tra­tion (SSA). To be eli­gi­ble for these ben­e­fits, the per­son must be approved through a strict list of qual­i­fi­ca­tions from the SSA, which can be found here. It is dif­fi­cult to qual­i­fy for SSDI ben­e­fits and the aver­age month­ly ben­e­fit in 2019 was $1,234.

How to Enroll in Dis­abil­i­ty Insurance 

When look­ing to buy dis­abil­i­ty insur­ance, first, look to see if your employ­er offers employ­er-spon­sored cov­er­age at work. Many times, employ­ers pay for all or a por­tion of the pre­mi­ums. Some employ­ers offer dis­abil­i­ty insur­ance for employ­ees to buy at a dis­count­ed rate as a vol­un­tary ben­e­fit as part of their ben­e­fits pack­age.  If you are part of a pro­fes­sion­al orga­ni­za­tion like a labor union or one for a spe­cif­ic pro­fes­sion, they may offer the abil­i­ty to pur­chase dis­abil­i­ty insur­ance at a group rate. Also, you may pur­chase insur­ance through an insur­ance bro­ker or direct­ly from an insur­ance company.

COVID-19 and Dis­abil­i­ty Insurance

In some instances, dis­abil­i­ty insur­ance may cov­er the par­tic­i­pant who is affect­ed by the COVID-19 pan­dem­ic. Some ben­e­fits will cov­er if you are med­ical­ly quar­an­tined because of a pos­i­tive COVID test or expo­sure to the coro­n­avirus and you can­not com­plete your work func­tion. This does not include state man­dat­ed “work from home orders.” Also, some COVID-19 sur­vivors have lin­ger­ing symp­toms such as fatigue, headaches, and pain and these symp­toms pre­vent them from being able to work. In these cas­es, short-term dis­abil­i­ty insur­ance may kick in. Check with your HR team or insur­ance bro­ker to ver­i­fy your cov­er­age and eligibility.

Dis­abil­i­ty insur­ance pro­vides the finan­cial secu­ri­ty need­ed by your­self and those who depend on you. In these uncer­tain times, hav­ing a back­up plan in place will give you the con­fi­dence that an unfore­seen ill­ness or injury will not deplete your bank accounts while you get back on your feet. Check into dis­abil­i­ty insur­ance plans at your work­place, pro­fes­sion­al orga­ni­za­tion, or through a local bro­ker. You and your fam­i­ly will be glad you did.

The infor­ma­tion and con­tent pro­vid­ed here­in is for edu­ca­tion­al pur­pos­es only, and should not be con­sid­ered legal, tax, invest­ment, or finan­cial advice, rec­om­men­da­tion, or endorsement.