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Disability Insurance Explained

No one anticipates becoming disabled, and far too often, many aren’t financially prepared if a disability occurs. About 1 in 4 adults will become disabled at some point before even reaching the retirement age, and the average person doesn’t have an adequate amount of emergency savings to cover their loss of income past two months. When someone experiences a disability, it disrupts their income and ultimately affects their family and lifestyle. 

What is Disability Insurance?

Disability insurance is a policy that provides income to those who can no longer work due to a disability. There are two types of disability insurance policies, short and long-term. Short-term coverage is intended to cover the individual directly after an illness or injury. Long-term coverage is designed to maintain their income past the short-term benefit period. The amount of coverage can vary and is based on the individual’s gross income. 

Short-term disability insurance is designed to cover the individual for a short period of time. The amount of time covered is typically 3 – 6 months but varies with each insurance carrier. Most short-term plans cover 60-70% of income. 

Long-term disability insurance is meant to provide benefits for an extended amount of time. The exact allotted amount of time depends on which plan the individual decides to enroll in. It’s generally stated in years: 5, 10, 30, or lifetime benefits. Most long-term plans cover 40-60% of income. 

The US Government does offer basic disability benefits through Social Security. However, the process to get benefits is lengthy, and not every application is approved. Their definition of disability is different from most insurance carriers. 

While workers’ compensation insurance covers medical bills and loss of income from injuries or illnesses that occur in the workplace, disability insurance offers coverage for events outside of the workplace. If you’re covered under the employer’s disability insurance but would like more coverage, several insurance carriers offer comprehensive policies that can supplement your current plan.

Defining Disability 

The language used in disability insurance policies varies from each carrier, along with how they specifically define what constitutes a disability. Some policies might only cover a portion of their medical bills. It’s imperative the covered individual is aware of the policy’s definition of a disability and the included coverage. 

Common claims for disabilities:

  • Cancer
  • Digestive disorders (hernias, gastritis)
  • Injuries: sprains, fractures, etc. 
  • Mental health issues (depression, anxiety, schizophrenia) 
  • Musculoskeletal disorder
  • Heart attack
  • Stroke
  • Arthritis
  • Diabetes
  • Back issues
  • Hearing loss

Each policy has an exhaustive list of what conditions are covered. The scope of a disability can be broad and understanding the specifications is vital. 

Types of Coverage

Other than short and long-term coverage, there are different sub-categories of disability insurance. There are several terms that insurance carriers can include in their policies and might alter coverage based on some of the terms used below.  

Group disability is coverage offered by their employer. Some employers may subsidize a portion of the premium. Group coverage is difficult to customize to meet individual needs since it’s through the employer.

Individual insurance if your employer doesn’t offer disability coverage or if you’re self-employed, any individual can get individual coverage. 

Own-occupation covers the individual if they can’t perform the tasks for their current job. They can work in another area of work and still receive benefits. For example, a dentist breaks their finger, which leaves them unable to perform their job, but they take another job teaching dentistry. That person can teach and continue to receive disability benefits. 

Any-occupation provides coverage if the individual is unable to work in any gainful occupation. If an accountant cannot perform their current position but could still work as a cashier, they could be denied benefits. 

Some insurance carriers might go further and include true own-occupation, modified own-occupation, two-year true or modified occupation, and total or partial disabilities. With group coverage, the individual can lose coverage if they move jobs or the company decides not to renew their disability insurance policy. Individual disability coverage follows the individual through any job or company switch. 

Cost Factors

There are several considerations that can determine the cost of disability insurance premiums. As with coverage, each insurance carrier has different factors for costs. 

Age – The earlier you buy, the lower the premium. 

Gender – Men pay less than women because maternity leave falls under the umbrella of short-term disability.

Occupation – If you’re in a more hazardous position, the premium is higher. As well as higher paying occupations. 

Health – The individual’s health history is considered and looks for disabling conditions; heart conditions, asthma, smoking, arthritis. Some carriers might require a blood or urine sample to evaluate their current health status. 

Elimination period – The amount of time before a benefit is payable. Common waiting periods are 30, 60, or 90 days. 

Location – States have different regulations for disability insurance. The cost of living in the state is a determining factor. 


Any unforeseen event can wreak havoc on a household’s finances that go beyond unexpected medical bills. Even people in perfect health can experience a burdening disability that restricts their source of income. Receiving disability benefits through Social Security is a prolonged process and can take up to two years. The considerations for qualifications are strict and many applicants get denied. 

Having a comprehensive disability insurance policy in place can prevent households from financial stress. Some families reported taking years to gain control of their finances after experiencing a disability. Finding the right policy for your needs can be difficult, but Alltrust Insurance is here to help. For additional information on disability insurance, contact us today. 


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