What are the types of disability insurance?

There are two main types of disability insurance:

• Short-term disability insurance replaces a percentage of your lost income for a brief amount of time—typically, between three to six months. Many short-term disability policies are automatically offered by employers as a benefit to their employees.
• Long-term disability insurance replaces a percentage of your lost income for an extended period of time. That amount of time, which is known as the benefit period, can last anywhere from about a year to until you reach retirement age. Long-term disability insurance usually replaces between 40% and 65% of your income. Like short-term disability insurance, this coverage may be automatically offered by your employer. You can also buy your own policy if your employer doesn’t offer coverage (or you’re self employed) or to supplement what your employer offers.

Both long-term and short-term disability insurance have a waiting period before you can receive benefits after suffering an injury or illness. It’s known as the “elimination period” and you can think of it as a deductible measured in time instead of money. The elimination period can last anywhere from a few days for short-term disability insurance to two years for long-term disability insurance.

In general, the cost of a disability insurance policy becomes less expensive the longer the elimination period is. That’s one reason why many people pair a short-term disability insurance policy with a long-term disability insurance policy. A short-term disability policy lets you increase the elimination period of your long-term disability policy. This can save you money on premium payments and give you needed financial support while you wait for your long-term disability insurance to kick in.

Many people assume government-provided disability benefits will help them weather a tough time, but those benefits are usually not enough to maintain your quality of life. Likewise, employer-sponsored disability insurance is often not enough.

This reality underscores the importance of having your own disability insurance coverage in place. The best way to learn more about disability insurance and to get a disability insurance quote is from a financial professional. Get started with our locator to find one in your community.