What is Disability Insurance?

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Hello readers!


In my post today, I’m going to attempt to give a brief overview of disability insurance. Do you have it? Should you have it? How do you get it? And, what is it anyways?? 

Disability insurance is used to pay a portion of your income if you cannot work for an extended period of time due to illness or injury.

The Social Security Administration says that 1 in 4 20-year-olds will experience a disability for 90 days or more before they reach 67.

The majority of Americans don’t have enough in savings to cover being out of work for that long and even if they do.. What happens if you’re out of work for even longer or permanently? That is the purpose of disability insurance. 

The two types of disability insurance are called short-term and long-term: 

Short term:

  • Typically replaces 60-70% of base salary

  • Typically pays out for a few months to one year

  • Typically has a short waiting period, such as two weeks, after you become disabled and before benefits are paid

Long term:

  • Typically replaces 40-60% of base salary

  • Benefits end when the disability ends. If the disability continues, benefits end after a certain number of years or at retirement age.

  • A common waiting period is 90 days after disability before benefits are paid (one of the many good reasons to have an “emergency fund” set aside in a savings account) 


It’s important to note that some policies only pay you if you can’t work for any job that you are trained for and some only pay you if you can’t work a job in your occupation. And some pay if you can’t work at all. If you work in a highly specialized field it’ll be important to pay attention to this detail when searching for a policy. 

Where can you get disability insurance?

Many employers offer disability insurance as a benefit, sometimes voluntary. You can also purchase a policy through a professional association, through a broker, or directly from the insurance company.

Some of the characteristics of an employer plan are that it’s easy to qualify, premiums are at no or low cost to you, and the payouts are taxable. On the other hand, getting a policy from an individual insurance company can move with you between jobs and be customized to meet your needs.  

Similar to life insurance, it’s always a good idea to shop around and compare plans to make the most informed decision!

If disability insurance sounds like something you’re interested in obtaining, now is the time to do you research and get covered. Here’s a helpful article with even more information: https://www.nerdwallet.com/blog/insurance/disability-insurance-explained/


Thanks for reading!!

~Kara P.