If you become too ill or disabled to work, disability insurance offers regular benefit payments so you don’t have to go without an income. There are several types of disability insurance — some provided by your employer, some you purchase independently — and they all offer slightly different coverage and benefits for different situations.
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The two main types of disability insurance are long- and short-term policies. However, long-term disability insurance is generally the best type of disability insurance for most people because it is the most cost-effective and offers the most comprehensive coverage.
Long-term disability insurance provides the most robust coverage if you become disabled.
Employer-sponsored disability plans, such as short-term disability insurance, are good supplements to a long-term disability plan.
Other types of disability insurance can complement your individual disability plan, but do not offer enough coverage on their own.
Long-term disability insurance
Long-term disability insurance pays out monthly benefits if you become too ill or disabled to work. The benefit period can last two, five, or 10 years, or even until retirement, and the monthly benefit is up to 60% of your gross monthly income. It generally costs about 1% to 3% of your salary.
According to Policygenius data, the average length of a long-term disability for someone in their 30s is a little under three years. Because of this, long-term disability insurance provides the most robust protection if you become disabled when compared to other types of disability insurance that pay out benefits for a shorter period.
Types of long-term disability insurance
There are two types of long-term disability insurance policies:
Any-occupation disability insurance: Only pays benefits if you can’t work any job that you’re reasonably suited for because of illness or injury. This is much harder to prove and it’s harder to receive a benefit, but it’s also generally less expensive than own-occupation disability insurance.
Own-occupation disability insurance: Defines a disability as an inability to work at your regular occupation and will pay out even if you can work another job.
There are also three kinds of own-occupation disability insurance policies:
True own-occupation: If you can’t work in your own occupation due to injury or illness, you get benefits even if you start working a different job.
Transitional own-occupation: If you can’t work in your own occupation due to injury or illness and you get a new job that provides a lower salary, you get benefits to make up the difference between your new (lower) and old (higher) salaries.
Own-occupation, not engaged: If you can’t work in your own occupation and you haven’t started a new job, you get benefits. Once you start a new job, no matter what field, you stop receiving benefits.
Short-term disability insurance
Like long-term disability insurance, short-term disability insurance replaces up to 60% of your pre-tax income if you can’t work due to an illness or injury. The difference, however, is that coverage only lasts for up to one year.
Short-term disability policies are often offered by your employer (group disability insurance), and some states require that employers provide short-term disability coverage.
Because the average disability lasts about three years, short-term disability insurance policies shouldn’t be bought in lieu of a long-term disability plan. Instead, they are a good supplement to long-term policies because they have a drastically shorter elimination period that can be just a few days. You can use a short-term policy to cover living expenses while you wait for your long-term policy to become active.
Short-term policies are also the same cost as long-term disability policies, but because coverage isn’t as comprehensive it’s not a very cost-effective choice.
Mortgage disability insurance
Mortgage disability insurance — also known as mortgage payment protection insurance — is a type of long-term disability insurance that specifically covers your mortgage payments if you can’t work due to an illness or injury.
Mortgage disability insurance can be purchased from your mortgage lender, an insurance agency, or a broker, and doesn’t require the typical underwriting process or medical exam that other long-term disability insurance policies do. It’s a good alternative if you cannot qualify for regular long-term disability coverage but don’t want to risk defaulting on your mortgage.
Supplemental disability insurance
Supplemental disability insurance closes the gap between the benefits paid by employer-sponsored disability plans (which can be taxed or capped), and the full amount of money you’ll need to cover your expenses in case you can’t work.
Social Security disability insurance
Social Security disability insurance (SSDI) is a federal program that provides payouts to some disabled U.S. workers and families, but only after a drawn-out application process that can take three to five months. Over 60% of applications are denied at the first application level and the average payout is just over $1,000 a month, so it’s not worth relying on. Most people are better off with a private disability policy.
State disability insurance
Some states offer their own short-term disability insurance plans that either employers pay for, employees pay for through payroll deductions, or a mix of both. The following states (and U.S. territory) offer state disability insurance, also known as temporary disability insurance:
You cannot purchase state insurance benefits through an agent or broker, and benefits aren’t generally payable for more than one year.
Because state disability insurance benefits are short-term, you’ll get the most protection by purchasing a long-term disability insurance policy even if you have state disability insurance.
Workers’ compensation, also known as workers comp, is a type of insurance that your employer is required to have in every state that pays out if you become injured at work. Many people assume that workers comp is a substitute for disability insurance, but it offers much less coverage. Workers’ comp does pay out a monthly benefit in the event an employee cannot work, but only if the employee’s injury happened at work.
Disability overhead expense insurance
Disability overhead expense insurance is a type of disability insurance specifically for business owners that will pay for a business’s overhead — including rent, utilities, employee salaries, payroll taxes, postage, accounting fees, and more — if you become ill or disabled and can’t run your business.
Disability overhead expense insurance needs to be bought in addition to a long-term disability policy, as it will not cover the loss of your own salary and expenses.
Alternatives to disability insurance
One alternative to disability insurance is a form of self-insurance. Self-insurance is not actually insurance, but refers to using your savings to fulfill your financial needs. Some people use savings to replace their income in the event of an illness or disability, but this risks depleting funds you’ll need in the future.
More than 50% of adults don’t have enough money saved to cover an emergency,  so for most people this is not an option. To protect your income, a licensed agent Policygenius can help you compare quotes and find affordable disability insurance.
Frequently asked questions
What are two main types of disability insurance?
The two main types of disability insurance are short-term disability insurance and long-term disability insurance. Short-term disability insurance only pays benefits for up to a year, while long-term disability insurance can pay until you reach retirement age.
What type of disability insurance should I get?
Long-term disability insurance is the best type of disability plan to buy because it is the most cost-effective. Alternatives to long-term disability insurance don’t pay enough benefits to suit most people's needs.
Who has the best type of disability insurance?
Each insurer treats each applicant differently, and working with an insurance broker is the best way to find the company that will provide the best disability policy for your situation.