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Types of disability insurance

There are two main types of personal disability insurance — short term and long term. But there are other kinds of personal disability insurance policies, along with Social Security disability and state disability insurance.

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Andrew HurstSenior Editor & Licensed Auto Insurance ExpertAndrew Hurst is a senior editor and a licensed auto insurance expert at Policygenius. His work has also been featured in The New York Times, The Wall Street Journal, Forbes, USA Today, NPR, Mic, Insurance Business Magazine, ValuePenguin, and Property Casualty 360.

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Anna SwartzAnna SwartzSenior Managing Editor & Auto Insurance ExpertAnna Swartz is a senior managing editor and auto insurance expert at Policygenius, where she oversees our car insurance coverage. Previously, she was a senior staff writer at Mic.com, as well as an associate writer at The Dodo.
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Anthony HeAnthony HeDisability Insurance Operations Manager Anthony He is a disability insurance expert and a former Operations Manager at Policygenius. He has 10 years of previous insurance experience and is a licensed agent in the state of New York.

Updated|5 min read

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All disability insurance replaces your income while you’re hurt or sick and can’t work, but there are different types of policies and coverage.

The ten main types of disability insurance are:

If you’re not sure what kind of disability insurance to get, or you want to compare quotes to make sure you get the best rates for your coverage needs, talk with a Policygenius agent.

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Personal and group disability insurance

A policy that you buy for yourself is called personal or individual disability insurance, while one you get through work as an employee benefit is called group disability insurance.

The main difference between group disability insurance and a personal policy is that a group policy is controlled by your employer and tied to your job, so you don’t get to keep the coverage if you leave. Since you usually pay for group disability policies with pre-tax dollars, your benefits are taxable.

Group disability insurance is also more likely to be short-term coverage, so it may be a good idea to get a personal long-term policy even if you already have group disability coverage through your job.

Long-term disability insurance

Long-term disability insurance can last anywhere from one year to through retirement age (usually 65 to 67). The longer your benefit period, the more expensive your policy will be.

Most long-term disability policies cover up to 60% of your gross income (which should come close to what you take home after taxes) and cost between 1% to 3% of your salary. So if you make $120,000 a year, you might pay between $100 and $300 a month for a policy.

Long-term disability insurance is best for high earners or people with jobs that require a lot of schooling or specialized training.

Types of long-term disability insurance

When you buy long-term disability insurance, you can choose between own-occupation and any occupation coverage:

  • Any-occupation: Only pays benefits if you can’t work any job that you’re reasonably suited for. Any-occupation coverage is cheaper, but it’s harder to qualify for benefits.

  • Own-occupation: Pays out when you can’t work the specific job that you’re trained for (like a heart surgeon or a lawyer), even if you can work in another, related role.

Types of own-occupation disability insurance

There are also multiple types of own-occupation coverage.

  • True own-occupation: You’ll still get paid out even if you can still work, as long as you’re unable to do the specific job you had before your illness or injury

  • Transitional own-occupation: If you can’t work in your specialized role due to injury or illness, but you can get a new lower-paying job, you can still get benefits. You can collect your entire benefit as long as your new salary and your benefits don’t add up to more than what you used to make.

  • Own-occupation, not engaged: You’ll only get paid if you can’t work in your original role and you haven’t yet found a new job. Once you start a new job, no matter the field, you’ll stop receiving benefits.

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Short-term disability insurance

Like long-term disability insurance, short-term disability insurance covers up to 60% of your pre-tax income if you can’t work. The difference is that short-term disability coverage usually only lasts for up to a year.

It’s worth having short-term disability insurance if you get it for free or at a discount through your job but, since it can cost as much as long-term disability insurance, it might be a smarter investment to get long-term disability insurance instead.

Business overhead expense insurance

Business overhead expense insurance is a special kind of disability insurance for small business owners. It doesn’t cover your personal expenses — that’s what a personal disability insurance policy does. A business overhead policy pays for your business’s overhead costs while you can’t work, including:

  • Accounting fees

  • Employee salaries

  • Payroll taxes

  • Postage

  • Rent

  • Utilities

Mortgage disability insurance

Mortgage disability insurance, which is also sometimes called mortgage payment protection insurance, is a type of limited long-term disability insurance that covers your mortgage payments while you can’t work due to an illness or injury.

You can buy mortgage disability insurance through your mortgage lender, an insurance agency, or a broker.

Mortgage disability insurance doesn’t require the typical underwriting process or medical exam that other long-term disability insurance policies do, so it might be worth having if you don’t qualify for regular long-term disability coverage but don’t want to risk defaulting on your mortgage.

Credit disability insurance

Your bank or mortgage lender may offer you credit disability insurance on top of your loan, which is a type of coverage that can help make your mortgage payments if you're sick or injured and can't work.

But credit disability insurance offers less coverage than a regular disability insurance policy. It's also more expensive, and you may have to pay interest on your premiums, so if you can qualify for a regular long-term disability option, that's probably a better option.

Social Security disability insurance

Social Security disability insurance, or SSDI, is disability coverage that you get through the federal government. While SSDI is free, it’s hard to qualify for coverage and the benefits are much lower than with other types of disability insurance.

To qualify for SSDI, you have to have a condition that’s expected to keep you out of work for at least a year. You must also meet work and income requirements and go through a potentially long screening process in order to qualify.

→ Read more about Social Security disability insurance

State disability insurance

Some states offer temporary disability insurance plans, which are funded by deductions from your paychecks. Most of these plans offer coverage for up to a year.

The following states (and U.S. territory) have state disability insurance programs, also known as temporary disability insurance:

  • California

  • Hawaii

  • New Jersey

  • New York

  • Rhode Island

  • Puerto Rico

You can’t purchase state insurance through an agent or broker, and benefits don’t usually pay out for more than one year.

Supplemental disability insurance

A supplemental disability insurance policy adds more coverage to any disability insurance you already have. It’s a great way to get more disability benefits or extend your benefit period without paying for an entirely new policy or going through another medical exam.

Supplemental disability insurance can close the gap between an employer-sponsored disability plan (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.

Workers’ compensation

Workers’ compensation, also known as workers’ comp, is a type of insurance that your employer is required to provide. While workers’ compensation pays out if you become injured at work, it’s different from disability insurance.

Workers’ comp actually offers less coverage than disability insurance does, and you can only qualify if your injury happened at work. A regular disability insurance policy doesn’t have this restriction — you can get benefits no matter where your injury happened.

→ Learn more about the workers’ comp guidelines in your state

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Types of disability insurance riders

A rider is an add-on that changes your disability insurance coverage. Some riders are free while others cost extra to add. Although riders aren’t exactly types of insurance, they can affect how your policy works.

Here are a few common disability insurance riders:

  • Automatic increase rider: Raises your benefits over a limited number of years without a medical exam.

  • Cost of living adjustment rider: Increases your monthly benefits to keep pace with inflation.

  • Future increase option: Allows you to increase your benefits a limited number of times without a medical exam.

  • Guaranteed renewable and non-cancelable: Ensures your policy stays active and your rates stay the same as long as you keep paying your premiums.

  • Partial or residual disability rider: You can receive some disability benefits if an injury or illness affects your income at all, even if you’re not unable to work.

  • Rehabilitation waiver: Helps pay for the cost of physical or occupational rehabilitation after a disability.

  • Retirement protection rider: Covers the payments that you would have made to a retirement fund while you were working.

  • Student loan protection rider: Continues your student loan payments while you’re out of work.

  • Survivor or death benefit: Pays a few months of benefits to a surviving beneficiary if you die while receiving disability payments.

Alternatives to disability insurance

Self-insuring can be an alternative to disability insurance. Self-insurance isn’t a type of disability insurance, it just means using your savings to cover your expenses while you’re out of work.

This is only an option if you have enough money saved up that you can rely on your savings alone while you’re not working.

If you’re looking for alternatives to disability insurance because you don’t think you can afford a policy, consider speaking with a Policygenius insurance expert. We can help you compare rates and find coverage at a price that works for your budget.

Disability insurance basics

Here are some important terms and phrases to know if you’re shopping for disability insurance:

  • Benefit amount: The amount you’ll be paid if an injury or illness keeps you from working.

  • Benefit period: The length of time that you’ll receive payments after a disability. Your benefit period can last a few months, years, or even decades.

  • Claim: The process of submitting proof of your disability to your insurance company so that you can start to collect your benefits.

  • Definition of disability: Your policy’s rules for what counts as a covered “disability.” This can affect whether you can receive any benefits, and how much you can collect.

  • Elimination period: Also called a “waiting period,” this is the amount of time you have to wait between a disabling event and when you can start receiving payments.

  • Rider: A disability rider is a change or addition to your coverage. Riders can be included or optional — you may have to pay extra to add an optional rider.

  • Premium: The regular payments you make to keep your disability insurance policy active.

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Frequently asked questions

What type of disability insurance should I get?

The right type of disability insurance for you depends on your needs. Long-term disability insurance offers the most protection, but if it’s too expensive you could pair supplemental disability insurance with a short-term policy you get through work.

Where do you get disability insurance?

You can get a disability policy from your work, on your own from a company of your choice, or through the federal government (if you qualify for Social Security disability).

When should you get disability insurance?

You should get disability insurance while you’re young and you can lock in low rates, since getting coverage only becomes more expensive as you age.

Author

Andrew Hurst is a senior editor and a licensed auto insurance expert at Policygenius. His work has also been featured in The New York Times, The Wall Street Journal, Forbes, USA Today, NPR, Mic, Insurance Business Magazine, ValuePenguin, and Property Casualty 360.

Editor

Anna Swartz is a senior managing editor and auto insurance expert at Policygenius, where she oversees our car insurance coverage. Previously, she was a senior staff writer at Mic.com, as well as an associate writer at The Dodo.

Expert reviewer

Anthony He is a disability insurance expert and a former Operations Manager at Policygenius. He has 10 years of previous insurance experience and is a licensed agent in the state of New York.

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