What Type of Disability Insurance is Right for Me?

If you are in a situation where you cannot work due to illness or injury, disability insurance will pay a portion of your regular income to help keep you afloat. Coverage like this can be vital, depending on the expenses you may incur and how much emergency savings you have.

While you may not need disability insurance at present, it’s important to consider it as anyone can be subject to injury or illness preventing them from work for an extended period. However, you may ask, “What type of disability insurance is right for me?”. Let’s explore below.

Different Types of Disability Insurance

Disability insurance is offered in two versions: Short-term and long-term.

Long-term disability is for illnesses and injuries that are more permanent or expected to last a long time, and that will prevent you from working. When approved, these benefits can kick in after 90 days and extend until retirement age, at which point social security benefits would take over. Payments will typically by 40%-60% of your income.

Short-term disability is more for emergencies, or injuries, illnesses, and medical situations for which you are expected to recover from within a shorter time frame. These benefits can start sooner, and payments can range from 60% to 70% of your income.

Obtaining a Disability Insurance Policy

Check with your employer first as often they will provide or offer policies themselves. In some states, it is mandated that they provide disability insurance policies for their employees. Disability insurance through your employers does have the benefits of being easy to qualify for and having much lower premiums. Some employers will cover these policies at 100%.

Workers Compensation insurance is mandated to be provided through all places of business and will pay out portions of your income if you are disabled or injured long term due to a work-related incident. While this is helpful, it will not cover any event or illness that takes place outside of the workplace.

If you need to purchase a private policy, they are on the lower end of the cost – typically about 3% of your annual salary. However, pricing can vary greatly depending on your age, gender, health history, income level, occupational hazard levels, and how long you choose benefits to last. History has shown that women and smokers tend to pay more for policies.

Social security benefits and state offered short term disability insurance (SDI) may also be a possibility and are at no additional charge to you. You can apply for these benefits upon your need for them. These programs are designed to assist you in the case of short term or long term injury or illness; however, they may not provide coverage for the length of time needed.

Private Policy Benefits

While obtaining a policy through your employer is a great option and usually cheaper, purchasing your own policy has its perks:

  • Any benefits you collect are non-taxable, whereas if obtained through your employer they are.
  • You have the freedom to choose the insurance company that most fits your needs and offers the most benefits.
  • You can select the features you want and that are important to you in your policy.
  • Your policy can transfer with you from job to job instead of being canceled if you leave the employer providing it.
  • The pricing on these plans can range from the low end of $5 per month to the high end of $175. If your quote is on the higher end, take a look at how much the plan is designed to pay, what the waiting period after the injury is, and how long the policy will cover you. Changing anything in these areas can reduce your cost.

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