Illustrated by Chelsea Miller
Last Updated December 14, 2023
6 min read

Disability Benefits & Insurance

Disability insurance benefits are the best way to know that your finances are secure in the event of an acquired disability or sudden illness.

Did you know, according to the Social Security Administration, about 1 in 4 of today’s 20 year-olds will become disabled before reaching the age of 67? And the majority of those people are not likely to have enough saved up to cover the out-of-pocket cost of an accident. So the question is, would you be prepared financially if an emergency strikes? Similar to health insurance, disability benefits protect employees in the event of illness or injury by creating extra security for policyholders.

What Is Disability Insurance?

Disability insurance is a product designed to protect its policyholder in an event that they are unable to work. In the case of something unexpected, the insurance provider equips the policy holder with a portion of the pre-tax earnings that they would’ve received had they been able to work.

Example: A policyholder that makes $4,000 a month just found out he’ll be in recovery, unable to work for 6-12 weeks. Since they’re insured for up to 50% of their income in the event of an accident, they’ll be getting a monthly benefit of $2,000 dollars until they’re unable to work.

Short-Term vs Long-Term Disability

There are two types of disability policies: Short-Term Disability and Long-Term Disability. Each of these policies are particular about when and how you use the policy.

  • What is short-term disability insurance?

    This is a type of insurance policy that is strictly focused on impairments lasting no longer than two years. Short-term disability policies typically have a waiting period of 0 to 14 days before the policyholder will receive any benefit. This often means that workers will have to use up a majority of their sick leave waiting for the insurance policy to take effect.

    Some of the most common short-term disability claims include pregnancy, musculoskeletal disorders (Carpal Tunnel Syndrome, Osteoarthritis, Rheumatoid Arthritis, Tendinitis, Fibromyalgia, etc), and injuries such as fractures, sprains, muscle strains. So, if you’re experiencing any of these injuries, don’t hesitate to take advantage of short-term disability—especially if you’re currently paying for it.

  • What is long-term disability insurance?

    An insurance policy dedicated to individuals who’ve had a life-altering impairment that could last anywhere from a few years to the rest of their lives. Long-Term Life Insurance has a waiting period of several weeks or several months before the policy will take effect. Musculoskeletal disorders, cancer, mental health issues, and circulatory diseases are numbered among the most common reasons for long-term disability.

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Illustration: Cristi Cash

Policy Protection Features

Just like any other benefit, disability insurance is fairly customizable based on your needs. There are two features of disability insurance you should look out for: Noncancelable and Guaranteed renewable.

  • Noncancelable is a protection feature that ensures that the policy cannot be canceled by the insurance company—apart from a failure on the policyholder’s end to pay premiums, that is. This means the policyholder is allowed to renew this policy every year without an increase in the premium or a reduction in benefits.
  • Guaranteed renewable gives the policyholder the right to renew the policy with the same benefits without fear of the policy being canceled. An insurer can, however, increase premiums for all policy holders in your same class.

The importance of disability insurance is a no-brainer. With the rising costs of medical care and the prevalence of chronic illnesses, disability insurance is one of the most important types of insurance you can buy. It's a way to protect yourself from financial hardship if you suffer from a long-term illness or injury that keeps you from working.

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