Disability insurance for federal employees

Learn how federal employees can supplement their public benefits with a private disability policy

Colin Lalley 1600


Colin Lalley

Colin Lalley

Insurance Expert

Colin Lalley is the Associate Director of SEO Content at Policygenius in New York City. His writing on insurance and personal finance has appeared on Betterment, Inc, Credit Sesame, and the Council for Disability Awareness.

Published June 21, 2018|2 min read

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Federal government employees may think they’re not eligible for private disability insurance, but that’s not true. Getting a private policy to supplement federal benefits is possible, but it can be confusing. This is because of complicating factors that have to be taken into account; private supplemental coverage depends on the benefits offered by government plans, which can vary. Before you shop for a private policy to complete your financial safety net, know what coverage limits apply.

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Disability coverage through FERS

Public employees are generally eligible for up to 30 days paid leave for sickness or injury, similar to short-term disability insurance plans.

Outside of that, employees may be eligible for disability retirement benefits through the Federal Employees Retirement System (FERS). Federal employees are considered disabled under FERS if you can’t perform “useful and efficient service in your current position” due to a medical condition or injury. The total amount of disability benefit you receive depends on your age, any Social Security disability benefits (SSDI), your salary, and how long you’re disabled.

Some important things to know about FERS benefits:

  • They’re taxable, unlike private disability benefits.

  • They cover 60% of income the first 12 months but drop to 40% after that.

  • Before you can receive FERS benefits you must apply for SSDI benefits, which are subtracted from your total coverage amount.

  • They can be difficult to qualify for.

This means you may not receive the amount of federal disability coverage you expected — but you also may not be eligible for the amount of private coverage you expected either.

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Combining private and public disability insurance

Disability insurance companies don’t want people to be overinsured. That’s why when an applicant has coverage through another source — say, through their employer — an insurance carrier will take that into account when considering how much coverage a person needs.

According to Policygenius disability insurance specialist Jake Roszkowski, this is where government employees can run into trouble. “Federal employees are tricky because often they are unaware of the benefits they’ll receive from public plans.” This is true for carriers, too.

With group coverage for private sector employees, a carrier will simply subtract the employer benefit from the maximum amount you can get under a supplemental policy. However, when it comes to federal employees, different insurance companies use different calculations to assume how much coverage you’d receive under FERS.

This can include:

  • Assuming you already have coverage for 40% of your income

  • Assuming you already have coverage for 40% of your income up to $10,000

  • Automatically assigning you 20% of your eligible benefit amount

In other words, your public benefits affect your private benefits, and you may not know how until you talk to a carrier or licensed disability insurance expert.

If you don’t know how much federal or private coverage you’re eligible for, you can find yourself underinsured. It’s important to determine this amount before purchasing any private supplemental disability policy.

Benefits of private disability insurance for federal employees

Disability benefits through FERS are typically barebones and don’t provide the tailored coverage that many people might need. A private disability insurance policy, on the other hand, can be customized with additional benefits such as:

  • Rehabilitation riders help pay for vocational training after a disability.

  • Partial or residual coverage gives partial benefits if your hours are cut back or you otherwise can’t work to your full potential to receive the same income as you previously did.

  • Future purchase options allows you to increase your coverage in the future without going through the underwriting process again.

Even though federal employees are eligible for their own benefits and supplemental coverage might be less than originally assumed, there are still benefits to getting a private policy that shouldn’t be ignored.