Disability insurance pays some or all of a worker's salary if that worker becomes disabled and is unable to work at his or her job. According to the Council for Disability Awareness, at least one out of every four workers will become disabled at some point during their working career. This disability can come from accidents or injuries on the job, as well as from other debilitating illnesses such as cancer or a heart attack. Disability insurance can reimburse disabled workers for some of the income they lose while recovering from illnesses and injuries.
Unlike Social Security disability, which covers most workers after they reach a certain age and is capped at a maximum monthly payment regardless of the worker's salary, private disability insurance can cover about 70 percent of a worker's salary at any age when a disability arises. Some workers may be covered by disability insurance through their employers, but many workers have limited coverage or no coverage at all. Individuals with little or no coverage can buy private disability insurance in order to protect their earning power and provide for their families should they be prevented from working by an illness or injury.
Private disability insurance policies usually come in the form of either short-term disability insurance or long-term disability insurance packages. Short-term disability insurance usually covers disabling illnesses for up to six months, while long-term disability insurance can cover much of a worker's salary for an entire lifetime, if necessary. Many insurance companies also offer additional protections and options, such as cost-of-living adjustments, guaranteed renewal, and refunding of some premium payments if the worker does not become disabled within a specified time.
The cost of disability insurance can vary widely depending on a variety of factors such as:
Compared with other types of insurance, such as life insurance or auto insurance, disability insurance can be expensive, with some estimates pricing premiums at several thousand dollars per year. People with a higher risk of injury or illness, such as those with dangerous jobs or preexisting health conditions, likely will pay higher premiums. However, depending on an individual's circumstances, the cost of disability insurance can outweigh the risk of losing one's home or not being able to provide for one's family in the event of a long-term disability.
Most people who buy private disability insurance do so through an insurance broker, just as one would if buying life insurance or homeowner's insurance. In order to receive an accurate quote, you will have to provide your insurance broker with information about your occupation, your income, your age, any existing health conditions you currently have, and any dependents you support with your wages. Based on this information, the broker will assess the likelihood that you might become disabled and determine a monthly or annual premium you would pay to receive benefit payments you desire.
Although disability insurance can provide policyholders with many benefits and protections, legal issues can arise (as with any contract). When policyholders submit a claim after becoming disabled, some are denied because their insurance policies do not cover certain injuries or because the insurance company disagrees with the doctor's findings that the policyholder is actually disabled. Some disability insurance policies, especially those provided by employers, are heavily regulated by complicated rules and procedures, and policyholders who do not follow these to the letter may have their claims denied. Policyholders whose claims are denied often face complex appeal processes, causing them to pay out of pocket while their claims are considered and reconsidered by the insurance company or judge.
Whether your disability insurance policy is short-term, long-term, employer-sponsored, or private, you may run into legal issues that require the experienced hand of a disability attorney. Lawyers are not cheap, but the cost of not getting legal help can sometimes be devastating. Find a disability law attorney in your area and get some peace of mind before filing.
Learn more about state-specific laws on our insurance legal answers page.
