How to get disability insurance

Whether it’s long-term, short-term or Social Security, disability insurance is an important part of your financial protection. It ensures that you have money coming in even when you’re unable to work due to illness or injury. It’s better than workers’ compensation, and it makes sure you’re able to pay your bills and keep pace with your financial goals.

If you don’t have disability insurance, applying for a policy is a straightforward process. And you can make it even easier by knowing what to expect and having all of the information you need ready. That way, when you start shopping, it’ll be a seamless experience and you can get covered quickly.

Read on to learn:

• How to buy long-term disability insurance
• How to buy short-term disability insurance
• How to apply for Social Security disability insurance

How to get long-term disability insurance

Long-term disability (LTD) insurance is the type of income protection that most people will need if they can’t work. It’s the most cost-effective form of disability insurance because it’s easy to qualify for, lasts the longest, and is the most comprehensive compared to other types. You can learn more about why long-term disability is worth it, but if you’re wondering how to apply for LTD insurance, you can do so in seven easy steps. The whole process typically takes around four to six weeks.

1. Know how much coverage you need

Where do you get started applying for disability insurance? By knowing how much coverage you actually need. There are a couple of ways to look at it:

• The benefit amount. This is how much your policy will pay out every month. Most people should aim for 60% of their after-tax earnings. Since long-term disability benefits usually aren’t taxed, this should keep you close to your usual income level.
• The benefit period. This is how long your benefits will last. The average disability lasts around three years, so a minimum five-year benefit period is recommended, but you’ll get the most protection with a benefit period that lasts until retirement.
• The elimination period. Also called the waiting period, this is how long it’ll be after filing a claim before you’ll receive benefits. An elimination period of 90 days is recommended. The longer the elimination period, the cheaper the policy.
• The policy cost. An insurance policy doesn't help much if you can’t afford to pay the premiums. The factors above, and others we’ll discuss later on, affect the price, and you should know how much you’re able to pay for a policy before shopping. Most policies will cost between 1-3% of your annual income.

Also keep in mind how much coverage you already have from, for instance, a group workplace policy.

2. Know what features to look for

There are a lot of ways to customize a long-term disability insurance policy. Some features come standard at no additional cost, while some riders allow you to tweak a policy to fit your needs by paying extra each month.

Common standard features include:

• Guaranteed renewable
• Waiver of premium
• Automatic increase benefit

Popular riders include:

• Own-occupation
• Non-cancelable
• Residual or partial disability benefit
• Future purchase option

There are a number of other riders out there that may not be worth it except for in specific scenarios, whether because they address niche needs or because they’re prohibitively expensive. Riders like a Social Security offset (complements Social Security disability insurance) and a cost-of-living adjustment (increases monthly benefit to keep up with cost of living) can be useful for some people but avoided by most.

Learn more about disability insurance riders.

3. Compare free quotes

Don’t choose the first policy you come across. It doesn’t cost anything to get quotes for disability policies from different insurance companies. Get a couple of quotes and compare them to make sure you’re getting the right policy at an affordable price before making a decision.

You can get long-term disability insurance quotes here, and talk to a licensed expert to answer any questions you have about your disability insurance needs.

4. Application

After you’ve decided on a disability policy, you can submit an application. A disability insurance application is between one and five pages and asks basic personal, financial, and health information.

5. Phone interview with the insurance company

Once you’ve submitted an application, you’ll have a short phone call with the insurance carrier. Also called a confidential interview, the phone interview will go more in depth on medical questions and determine if, for instance, you have a pre-existing condition that will be excluded from coverage.

6. Underwriting

If you’re familiar with life insurance underwriting, the process is similar for disability insurance. There are three main steps in the disability underwriting process:

• A medical exam, where your health and medical information will be verified. It’s essentially the same as a standard physical. The insurance company will schedule a time to take the exam and can send a technician to your home or office for your convenience.
• Income verification through pay stubs or the previous year’s tax returns to make sure the amount of protection you’re applying for is appropriate.
• A request for an attending physician’s statement, or APS, which is your health history from your doctor’s point of view.

Some insurance companies offer simplified underwriting which waives the medical exam and income verification steps, speeding up the process considerably.

7. Sign your issued policy

The disability company will issue you a policy, and all you have to do is sign a copy, send it back, and make your first premium payment for it to be in force.

Be sure to read the policy before signing it. It will usually be issued as-applied — meaning it’s what you expected when you applied — but there could have been some last-minute changes based on the results of the phone interview or underwriting process that raised or lowered the price.

How to get short-term disability insurance

The process for applying for short-term disability insurance is essentially the same as buying long-term insurance. You’ll need to determine your coverage amount and length and provide a lot of the same information regarding your health and income.

However, there are some big differences between long- and short-term disability policies that you should be aware of before applying:

• As the name implies, short-term insurance has a shorter elimination period and benefit period. There’s typical an elimination period of around two weeks, and benefits don’t last more than a year.
• There’s also a different benefit amount. LTD covers up to 60% of your salary, while short-term disability benefits cover up to 80%. Keep this in mind when determining your coverage needs.
• Short-term disability insurance costs roughly the same as long-term insurance but covers you for less time. That means it’s not as cost-effective, and you’re probably better off getting subsidized coverage from your employer than buying a private policy.
• There are fewer insurance companies that offer short-term disability insurance compared to LTD, so you may have to shop around a bit more before finding a policy that fits your needs.

How to get Social Security disability insurance

Social Security disability insurance (SSDI) is a benefit provided by the government, so it’s not something you have to buy. But you do have to apply for it, and it’s much more difficult to qualify for than other types of disability insurance.

You can apply online or by calling the Social Security Administration (SSA). Before you begin your application, gather the following to make the process easier:

• Information about yourself, including your Social Security number and financial institution information
• Information about your medical condition, including doctor and clinic information
• Information about your work, income, and other benefits
• Pertinent documents like birth certificate, proof of citizenship, medical records, and pay stubs or tax returns

After you apply for SSDI, the SSA may contact you for additional information. It can take three to five months for the SSA to file your claim and most people are denied because the definition of disability is much more strict than that of private insurance. You can appeal the SSA’s decision, which can also take several months.

Because qualifying for SSDI is difficult, and because SSDI benefits are lacking compared to private disability policies, most people are better off not relying on it. Learn more about why SSDI isn’t worth it.