Is Disability Insurance Worthwhile?

Disability can come from a car accident or serious injury on the job, such as an amputation. It can also arise from other debilitating illnesses, such as cancer or a heart attack. These conditions can make it harder, if not impossible, to continue working in your own occupation. 

This article discusses the types of disability insurance, the basics of disability insurance, and why you should get it. It also mentions how much disability insurance costs and how to get it. Finally, it addresses the legal issues surrounding disability insurance.

If you have more questions about disability insurance, speak with a disability lawyer near you.

What Is Disability Insurance?

Disability insurance pays some or all of your salary if you become disabled and can’t work at your job. According to the Council for Disability Awareness, at least one out of every four workers will become disabled at some point during their working career.

Disability insurance can reimburse disabled workers for some of the income lost while recovering from illnesses and personal injuries. The amount of money you’d receive depends on the policy’s disability coverage.

Why Get Disability Insurance?

Private disability insurance is beneficial because it can cover about 70% of your salary as a worker when a disability arises. This is true regardless of your age. Social Security disability insurance, in contrast, only covers most workers after they reach a certain age. Social Security disability benefits are administered by the Social Security Administration (SSA). Benefits are capped at a maximum monthly payment regardless of a worker’s salary.

Some workers may be covered by disability insurance through their employers. But many workers have limited coverage or no coverage at all. Workers with little or no coverage can buy private disability insurance to protect their earning power and provide for their families if they’re prevented from working due to an illness or injury.

Types of Disability Insurance

Private disability insurance policies usually come in the form of either short-term disability insurance or long-term disability insurance packages. Short-term disability insurance usually covers disabling illnesses for up to six months. Long-term disability insurance can cover much of a worker’s salary for an entire lifetime, if necessary.

Many insurance companies also offer additional protections and options. These include cost-of-living adjustments, guaranteed renewal, and refunding of some premium payments if you don’t become disabled within a specified time.

Employer-Sponsored Disability Insurance

Similar to health insurance, some employers opt to sponsor a disability insurance plan for their employees. The main benefit of this option is paying a lower group rate, which is usually less expensive than an individual policy. How an employer manages the group plan can affect disability income taxes, the policy’s definition of disability, and other details.

These employer-sponsored plans aren’t always available. In a few states, disability laws generally only require some employers to offer short-term disability benefits. Most states don’t require employers to cover long-term disability claims. This option is voluntary.

Many employers still choose to offer disability insurance to employees. But you should carefully review the terms and costs of an employer’s policy before you enroll. In some circumstances, an individual policy might be more suitable. 

Individual Disability Insurance

You may consider an individual disability policy if your employer doesn’t offer one or you are self-employed. This choice can give you peace of mind and financial protection if a serious injury leaves you unable to work.

Disability insurance premiums can be higher for individual plans, but you can decide which plan is right for you and customize your coverage. Since individual plans aren’t dependent on your employer, you can keep your policy between job changes.

Social Security Disability Insurance

Unlike the two types described above, SSDI offers disability coverage through the government. You can’t purchase SSDI in the same way you can buy a policy from an insurance provider. Instead, your eligibility depends on how long you’ve worked and paid taxes into the Social Security system. See FindLaw’s Social Security Disability Law guide to learn how this public disability insurance works.

How Much Does Disability Insurance Cost?

The cost of disability insurance varies widely, depending on several factors, including:

• Your occupation
• Your health
• Your lifestyle habits, such as tobacco or alcohol use
• The amount of monthly benefits you intend to receive
• The disability insurance policy’s options

Compared to other types of insurance, such as life insurance or auto insurance, disability insurance can be expensive. Some estimates price premiums at several thousand dollars per year.

Suppose you pose a higher risk of injury or illness due to having a dangerous job or a preexisting health condition. In that case, you’ll likely pay a higher premium. But depending on your circumstances, the cost of disability insurance can outweigh the risk of losing your home or not being able to provide for your family if you’re disabled.

How Do I Get Disability Insurance?

You usually buy private disability insurance through an insurance broker. This is similar to how you’d buy life insurance or homeowner’s insurance. 

To receive an accurate quote and determine your eligibility, you’ll need to provide your insurance broker with information about:

• Your occupation
• Your income
• Your age
• Any existing medical conditions you currently have
• Any dependents you support with your wages

Based on this information, the broker will assess the likelihood of you becoming disabled. They’ll determine a monthly or annual premium you would pay to receive the benefit payments you desire.

Legal Issues With Disability Insurance

Disability insurance can provide policyholders with many benefits and protections, but legal issues can still arise (as with any contract). When you submit a claim as a policyholder after becoming disabled, your claim might be denied.

Disability claim denial may happen because:

• Your insurance policy doesn’t cover certain injuries
• Your insurance company disagrees with your doctor’s findings that you’re disabled by your impairments

Some disability insurance policies, especially those provided by employers, are heavily regulated by complicated rules and procedures. Follow these rules and procedures to the letter to ensure your claim isn’t denied. Appealing the denial of your claim is often a complex process. You may have to pay out-of-pocket expenses, like medical bills, while your claim is considered and reconsidered by your insurance company or a judge.

So, Is Disability Insurance Worth It?

Everyone’s circumstances differ, but getting an insurance policy can protect you against the uncertainty of the future.

A few factors to consider when making your decision include:

• How much you currently earn
• Your individual risks of developing a disability based on your medical history, occupation, or lifestyle
• Whether you have dependants, such as young children
• Your current living expenses
• Your existing debts like student loans, credit card debt, or mortgage payments
• How long you have until retirement age

There isn’t a universal answer to this question. However, common financial advice, such as saving up a six-month emergency fund, may not help in a disability scenario. Many people can only rely on savings and other financial strategies to pay bills for a short time. Disability insurance can support you over an extended period if you qualify for benefits under your policy.

Protect Your Interests: Call a Disability Lawyer

Suppose you’ve sustained car accident injuries resulting in broken bones, a spinal cord injury, or a traumatic brain injury. You’ve filed a disability claim related to your auto accident.

Whether your disability insurance policy is short-term, long-term, employer-sponsored, or private, you may face legal issues requiring a disability attorney’s help. If your accident wasn’t work-related, you won’t be eligible for workers’ compensation benefits.

Find a disability law attorney in your area to navigate your disability insurance benefits. They can help ensure you have adequate funds to cover medical expenses associated with any medical care you may need after a car crash or back injury. Learn more about state-specific laws on our insurance legal answers page.