What Is Disability Insurance?

In addition to government benefits from Social Security, you may have purchased an individual disability insurance policy, or received disability insurance coverage through your employer.  Most disability insurance replaces some or all of your income, and can provide other benefits, if you lose income due to a covered disability.  This page focuses primarily on long-term disability insurance.  However, it is important to understand the different types of disability insurance coverage.  For example,

• Short-term disability (“STD”):  STD insurance replaces all or a percentage of income if you can’t work due to a covered disability.  Typically, STD benefits are payable for 180 days (6 months) or less.  While STD coverage can be purchased individually (through insurance companies like Aflac), it is often provided as an employment benefit.

• Long-term disability (“LTD”):  LTD benefits replace all or a percentage of income if you can’t work due to a covered disability.  LTD coverage can be purchased individually (individual coverage), or earned as an employment benefit (group coverage).  LTD group coverage can be provided through plans that are fully funded by your employer.  These self-funded plans are often administered by third-party administrators (“TPA”) like Sedgwick.  LTD group coverage can also be funded and administered by policies of insurance.  LTD insurance policies may be issued by companies such as MetLife, Unum / Provident / Paul Revere, The Standard, Aetna, Cigna / Life Insurance Company of North America, Hartford, Reliance Standard, Assurant, USAA, Prudential, Liberty Mutual, or Northwestern Mutual.  LTD benefits from individual coverage usually start 60 to 180 days after the date of disability.  LTD benefits from group coverage usually begin 180 days after the date of disability.  Commonly, people who receive LTD coverage as an employment benefit also purchase their own individual policies for added coverage.  In addition, some retirement pension plans provide a disability retirement benefit.

• Life insurance waiver of premium:  Many Life insurance policies include a waiver of premium benefit.  With this benefit, your life insurance coverage will continue without premium if you meet the definition of disability in the policy.

• Long-term care:  Long-term care coverage pays some or all of the cost for personal care and board in the event that you are partially or totally unable to care for yourself.  This coverage is often purchased individually, but it could be provided as an employment benefit.
• Health insurance:  Health insurance covers all or a portion of the cost of your medical treatment.  A fortunate few work for employers who will provide continued health insurance to disabled employees so long as they are disabled.  Most people will eventually lose employer sponsored group health insurance coverage if they become disabled.  The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal law that gives workers the right to continue to participate in their employer’s health plan, for a limited period of time, if you pay the premiums.  If you are no longer eligible for health insurance coverage through your employer, or through group health insurance through a spouse’s employer, then you may need to explore purchasing your own health insurance coverage, applying for Medicare, or both.