What Is Disability Insurance? Long-Term and Short-Term Coverage Explained

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Disability insurance, also known as disability income insurance, can pay you a portion of your typical income if you become disabled and are unable to work. Coverage typically costs between 1% and 4% of your annual salary and may provide benefits on a short-term or long-term basis.

Keep reading for more information on disability insurance including what it covers and what your options are for obtaining a policy.

Key Takeaways

  • If you develop a disability that keeps you from working, disability insurance will usually pay you between 50% and 70% of your lost income for a set period of time.
  • Disability insurance typically costs between 1% and 4% of your yearly wages but exact prices can depend on your age, health, policy details and more.
  • Short-term policies usually have shorter waiting periods and pay out benefits for up to two years, while long-term policies have longer waiting periods and could pay out benefits for as long as the rest of your life.
  • You may be able to obtain disability coverage through your employer, through Social Security, as a standalone private policy or as an add-on to your life insurance policy.

What Is Disability Insurance?

Disability insurance is a coverage type that can make up for lost income in the event that an accident or illness causes you to develop a disability that prevents you from working. It is often available through your employer or Social Security but you can also purchase coverage from a private insurance company.

What Are the Benefits of Disability Insurance?

Disability insurance can supplement your health insurance by providing money that you can broadly use to cover your regular expenses whenever you become disabled. While your health insurance will only pay for medical expenses, disability insurance can help you make sure your other bills don’t go unpaid while you are out of work.

It may be beneficial to shop from private insurers since they generally have less strict eligibility requirements than the Social Security Administration and may offer more favorable benefit structures depending on your circumstances.

For example, Social Security may base your disability payouts on your average earnings across your entire career, while a private insurer may simply calculate your benefits based on your income at the time you became disabled.[1]

What Types of Disability Insurance Policies Are There?

Disability insurance policies differ in many different ways including how you obtain coverage, how long benefits are available and how much money you can receive once you become eligible to collect benefits.


Short-term disability insurance typically provides benefits for up to two years after you become disabled, although some insurance companies may offer benefits for longer.[2] Your monthly payout will typically depend on your occupation and income prior to your sickness or injury. For example, State Farm’s short-term policies can provide between $300 and $3,000 per month.[3]

The deductible for a disability insurance policy takes the form of a waiting period, which is a set window of time following your insurance claim when you are responsible for covering all expenses out of pocket. After your waiting period, your insurance carrier will start providing disability benefits.

Short-term policies typically come with shorter waiting periods lasting up to two weeks. Some short-term policies do not have a waiting period at all, meaning you are eligible to start collecting benefits as soon as your disability claim is approved.[2]


The benefit period for a long-term disability insurance policy can range from a few years to the rest of your life depending on your insurance provider.[2] For example, State Farm may pay you between $500 and $20,000 per month for as little as five years or as long as you need benefits up to the age of 67.[4]

Long-term disability insurance policies also tend to require longer waiting periods before your insurance company will start paying. After you apply for disability benefits, you will generally have to wait several weeks to several months before you will receive any payments.[2]


You may be able to collect disability benefits through a group insurance plan offered by your employer. Most companies are required to carry workers’ compensation insurance in every state except for Texas, where the regulation only applies to companies contracting with a government entity.[5] However, workers’ compensation insurance generally only provides disability benefits to employees who are injured on the job.

As a result, your employer might maintain additional group disability insurance to cover off-the-job accidents and illnesses. Several businesses offer long-term disability coverage, although this type of coverage isn’t required by law in any state.[6] Meanwhile, short-term disability insurance is mandatory in a few states.

Employers in Hawaii and New York are required to provide short-term disability benefits, whether by purchasing a disability insurance plan or by self-insuring.[7][8] Meanwhile, employers in the regions listed below must deduct money from employees’ paychecks to pay into a state-run program that provides short-term disability benefits or, in some cases, substitute participation in the program with an approved private disability plan.

  • California[9]
  • New Jersey[10]
  • Rhode Island[11]
  • Puerto Rico[12]


An individual disability insurance policy from a private insurance provider is an alternative to group coverage if your employer doesn’t offer disability insurance or if you live in a state where only short-term disability coverage is required but want to receive long-term coverage as well. Disability insurance is often available as a standalone policy but you may also be able to receive benefits by adding a disability rider to your life insurance policy.

You could also receive individual disability benefits from the federal government through either Supplemental Security Income (SSI) or Social Security Disability Insurance (SSDI). However, SSI is limited to low-income individuals, while SSDI is restricted to those who have worked long enough and recently enough to pay taxes into Social Security.[13] In addition, you may not qualify for SSDI unless your disability is so severe that you can’t perform the responsibilities of any job that exists in the national economy.[1]


Private disability insurance plans typically only cover 50% to 70% of your lost income, which means you may need a second policy to replace your entire paycheck in the event that you become disabled.[14] A supplemental disability insurance policy can be especially valuable if you are already insured through your job or a government-run plan but would like to fill in the gaps in your existing coverage.

How Does Disability Insurance Work?

Private disability insurance policies can come with two different kinds of protection features. If your policy is noncancelable, then your insurer can’t raise your insurance rates or reduce your benefits and your policy can only be canceled if you fail to pay your premiums. Your insurance company is also not allowed to cancel a guaranteed renewable policy except for nonpayment of premiums but it can raise the rates of every policyholder within a given rating class.[2]

Disability insurance policies can also have different provisions dictating when you are eligible to collect benefits. An own-occupation policy will pay out benefits if you develop a disability that prevents you from carrying out the duties of the job you currently have. Conversely, an any-occupation policy will only pay out benefits if you develop a disability that prevents you from carrying out the duties of any job you are qualified for.[15]

Even though disability insurance protects a portion of your income, it doesn’t necessarily guarantee that you will get to keep your job.

Under the Family and Medical Leave Act (FMLA), eligible employees can only take off 12 weeks per year due to a serious health condition before a covered employer is no longer obligated to hold their job.[16]

What Does Disability Insurance Cover?

Disability insurance should provide coverage for most kinds of medical conditions that could inhibit your ability to work including the following:[17]

  • Broken bones and spinal injuries
  • Complications related to pregnancy and childbirth
  • Chronic back pain
  • Arthritis
  • Hip and knee injuries
  • Cancer
  • Diabetes
  • Heart disease
  • Depression
  • Post-traumatic stress disorder (PTSD)
  • Vision or hearing loss

Once you receive a disability insurance payout, there generally aren’t any restrictions on how you can spend the money. As a result, you could use it to pay off your medical bills or put it toward regular expenses like your mortgage and groceries instead.

What Isn’t Covered?

Disability insurance policies often exclude coverage for self-inflicted disabilities and injuries you sustain while committing a criminal act.[17] In addition, each insurance provider may enforce its own set of exclusions. Examples of disabilities that may not be covered include the following:[3]

  • Normal pregnancy and childbirth
  • Injuries related to war or active duty
  • Injuries incurred while under the influence of drugs or alcohol
  • Pre-existing conditions
  • Injuries resulting from cosmetic surgery
  • Injuries sustained while in prison
  • Concurrent disabilities (i.e. your insurer will only provide one monthly payment while you are out of work even if you develop multiple disabilities)

Keep in mind that, even though you can spend your disability insurance payout on whatever you wish, these payments will not automatically go toward covering medical treatments or long-term care services related to your disability. You should also note that your policy may stop providing benefits once you turn 65 since you will be past the typical working age and may no longer have an income to replace.[18]

How Much Does Disability Insurance Cost?

You can generally expect to spend between 1% and 4% of your annual income on disability insurance premiums each year.[15] For example, if you make $60,000 per year, then your monthly premiums will likely be between $50 and $200.

Exact prices can vary based on factors like your age, sex, occupation, income, health conditions and policy details. That said, it’s worth noting that your premiums may be waived once you have been disabled for at least 90 days.[2]

How Do I Get Disability Insurance?

If you are shopping for individual disability coverage from private insurers, it’s recommended that you obtain quotes from three to five companies. Prospective insurers will need information like your coverage needs, medical history, employment information and more so be sure to have all relevant documents ready before you contact insurance carriers for quotes.


Who is disability insurance best for?

Disability insurance is best suited for someone who has high-risk hobbies or a family or medical history of serious disabilities or diseases such as cancer. That said, disability insurance can be beneficial for anyone who relies on the bulk of their income to pay for regular expenses.

Am I required to have disability insurance?

You are not personally required to buy disability insurance, although employers in Hawaii, New York, California, New Jersey, Rhode Island and Puerto Rico are required to provide short-term disability coverage or participate in a state-run disability insurance program.[7][8][9][10][11][12]

Is disability insurance the same as health insurance?

No, disability insurance is not the same as health insurance. Health insurance helps cover the costs of medical services, while disability insurance provides payments that you can spend as you wish if you develop a disability that keeps you from working.

Can I get disability insurance if I’m self-employed?

Yes, you can purchase coverage for yourself from a private disability insurance company if you’re self-employed.


  1. United States Bureau of Labor Statistics. “An Analysis of Private Long-Term Disability Insurance Access, Cost, and Trends.” Accessed September 13, 2023.
  2. Insurance Information Institute. “What Are the Types of Disability Insurance?” Accessed September 13, 2023.
  3. State Farm. “Short-Term Disability Insurance.” Accessed September 13, 2023.
  4. State Farm. “Long-Term Disability Insurance.” Accessed September 13, 2023.
  5. National Federation of Independent Business. “Worker’s Compensation Laws – State by State Comparison.” Accessed September 13, 2023.
  6. Insurance Information Institute. “Will My Employer Provide Disability Coverage?” Accessed September 13, 2023.
  7. Hawaii Disability Compensation Division. “About Temporary Disability Insurance.” Accessed September 13, 2023.
  8. The Official Website of New York State. “Introduction to the Disability Benefits Law.” Accessed September 13, 2023.
  9. California Employment Development Department. “Employer Eligibility and Benefits FAQs.” Accessed September 13, 2023.
  10. New Jersey Department of Labor & Workforce Development. “Division of Temporary Disability and Family Leave Insurance | Information for Employers.” Accessed September 13, 2023.
  11. Rhode Island Department of Labor and Training. “TDI / TCI for Employers.” Accessed September 13, 2023.
  12. The Hartford. “Puerto Rico Disability Insurance Program | PR SINOT.” Accessed September 13, 2023.
  13. Social Security Administration. “Disability Benefits.” Accessed September 13, 2023.
  14. Insurance Information Institute. “How Can I Insure Against Loss of Income?” Accessed September 13, 2023.
  15. New York Life. “Cost of Disability Insurance.” Accessed September 13, 2023.
  16. United States Department of Labor. “Family and Medical Leave Act (FMLA).” Accessed September 13, 2023.
  17. New York Life. “What Does Disability Insurance Cover?” Accessed September 13, 2023.
  18. Administration for Community Living. “What Is Covered by Health & Disability Insurance?” Accessed September 13, 2023.

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