Life insurance protects your family from financial loss after you’ve passed away. Disability insurance ensures that you and your family are financially protected while you’re still alive.
A disability insurance policy provides an income replacement if you’re unable to work due to a disability. Along with life insurance, disability insurance is an essential part of your financial protection plan.
If you don’t already have long-term disability insurance, applying for a policy when you’re shopping for life insurance makes the process a lot easier. Both applications take about four to six weeks to process. You can also use the same medical exam for each application.
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How life insurance and disability insurance work
Life insurance and long-term disability insurance are both sources of income protection. However, each product differs in when and how it offers coverage. The chart below demonstrates the key components of life and disability insurance.
Criteria | Term life insurance | Long-term disability insurance |
|---|---|---|
Primary purpose | Provides financial protection for your dependents if you die | Provides income protection for you if you become disabled and unable to work |
Benefit period | Lump sum if you die while your policy is active | 2, 5, 10 years, or until retirement |
Coverage amount | $100,000 to $1 million+ | Up to 60% gross monthly income |
Average cost | $20-$40 per month for healthy individuals | 1-3% of annual salary |
What does life insurance cover?
Life insurance is meant to account for any financial loss that will occur when you die. It can also provides an income replacement to your beneficiaries if they depend on your income.
Life insurance benefits are typically tax-free, and your family and dependents can use the money at their discretion. The death benefit can pay for medical bills, funeral costs, mortgage payments, college tuition, student loans, and even vacations.
What does disability insurance cover?
Life insurance protects your beneficiaries when you die, but long-term disability insurance is meant to be used while you're still alive.
If an accident or illness prevents you from working, the long-term disability benefits pay out about 60% of your salary for a length of time specified in your policy.
The chances of becoming disabled at some point in your career are likely. In fact, one in four people experience a disability at some point while they are employed. [1]
Cancer, back and muscle pain, depression, and anxiety are all examples of conditions that may prevent someone from working.
The chart below shows the likelihood of getting a disability at each age. You’ll notice that as you get older, the likelihood that you become disabled for a longer period of time increases.
Current age | Likelihood of a long-term disability before retirement | Average duration of a long-term disability |
|---|---|---|
20-30 | 2.5 in 10 | 26 months |
31-40 | 3.3 in 10 | 32 months |
41-50 | 3 in 10 | 42 months |
51-60 | 2.3 in 10 | 50 months |
60+ | 1 in 10 | 54 months |
How to apply for life and disability insurance at the same time
Applying for long-term disability insurance is a very similar process to applying for life insurance. Applying for both at the same time ensures that you’re not lacking any necessary financial protection. You also won’t need to spend months going through the same application process twice.
Both insurance policies require the following steps in the underwriting process to receive coverage:
A brief phone interview to figure out how much coverage you need and are eligible for
A medical exam to assess your health and determine how much you pay
An attending physician’s statement, or an APS, to collect any information about any remaining medical questions, if applicable
Additionally, the disability insurance underwriting process usually asks about your income and occupation. You may be asked to provide documents to show your income to get a policy that reflects your financial needs.
Disability insurance rates and life insurance rates vary for each insurer because each insurance company’s underwriting rules are slightly different. One insurer may charge more for high blood pressure while another might care more about your family history.
Working with an independent broker like Policygenius makes the process easier for you. An agent can review both applications and find the best rates for your disability insurance and life insurance coverage.
Should you apply for life and disability insurance at the same time?
There are a few reasons why applying for life and disability insurance at the same time makes sense.
Secure low rates: Both the cost of buying life and disability increase as you age, which makes it advantageous to apply sooner rather than later. There can be some exceptions to this rule, such as if you’re in the later stages of pregnancy or you have recently lost weight.
Two applications but one timeline: Both applications take about the same amount of time, so you can save time if you apply for both at once. There are two separate applications, but you can use the same medical exam and labs. The lab results from the medical exam are usually good for six months to a year, depending on your age and insurance company.
Make sure you’re covered: If for some reason you can’t afford the disability insurance premiums offered, you can add disability riders to your life insurance policy. But, you can only do this while applying for life insurance. Going through both applications at the same time ensures you are on the right timeline to get the most robust coverage.
How to add disability coverage to your life insurance policy
Long-term disability policies offer the most robust income protection if you become disabled and can’t work. But if you can’t afford to pay for two separate insurance policies, you can add a disability rider to your life insurance policy.
These riders require additional underwriting and will usually increase how much you pay for life insurance, but they’re the next best thing if you can’t afford a stand-alone disability insurance policy.
Here are a few different disability riders you can add to a life insurance policy:
Disability income rider: A disability income rider pays out some of the death benefit if you become disabled and cannot work, but it doesn’t pay out nearly as much as a standalone disability would.
Waiver of premium rider: With a waiver of premium rider, you no longer need to pay your life insurance premium payments if you become disabled and can no longer earn an income.
Accelerated death benefit rider: If you’re diagnosed with a terminal illness, you can use the accelerated death benefit rider to tap into your policy to cover any of your expenses.
Critical illness rider: Similarly to the accelerated death benefit rider, the critical illness rider pays out money from the death benefit if you become terminally ill or have a serious medical complication.
→ Learn more about the disability riders you can add to your life insurance policy
Life and disability insurance offer crucial financial protection. Applying for both at the same time makes the application process seamless and efficient. Work with a Policygenius agent for free to streamline the application process and get both policies at the most affordable price.
Frequently asked questions
Is disability included in life insurance?
Disability coverage isn’t automatically included in life insurance policies. It’s common for individuals to buy both a disability and a separate life insurance policy. In most cases, you can also add a disability rider to a life insurance policy.
Are life insurance and disability insurance the same?
Life and disability insurance are not the same. Life insurance protects the financial health of your beneficiaries after you die. Disability insurance pays out while you’re alive if you become too disabled to work.
Can I get life insurance while on disability?
Having a disability will not stop you from getting life insurance. Depending on your overall health and lifestyle profile, you may have to pay a higher rate for for your life insurance.
