Jane Dotson
Disability insurance is a type of insurance that protects an employee's ability to earn an income if they experience a severe illness or injury. It is meant to cover long periods of absence from work, usually following a predetermined waiting period. Short-term and long-term disability insurance are available, with varying benefit periods, elimination periods, and benefit amounts. Typically, an employee must be unable to perform their regular work duties due to illness or injury to qualify for benefits under the policy. Disability insurance is usually paid for in full or in part by the employer.
| Characteristics | Values |
|---|---|
| Qualifying factors | At least 65 years old, blind, or disabled with low income or limited resources |
| Definition of disability | A mental or physical impairment diagnosed by a healthcare professional that causes an inability to perform substantial gainful activity, i.e., work |
| Maximum federal amount for monthly SSI payments | $1,371 for an eligible individual with an eligible spouse (as of January 2023) |
| Benefit period for short-term disability insurance | 3-12 months |
| Benefit period for long-term disability insurance | 2-10 years or longer |
| Coverage level for disability insurance | 40%-80% of lost gross wages |
| Elimination period | Waiting period between when an injury/illness occurs and when the policyholder is eligible for a payout |
| Weekly benefit amount | $50-$1,681 for up to 52 weeks, depending on previous wages |
| Job protection | Not guaranteed, but may be protected through laws like FMLA or CFRA |
| Health insurance | May be covered through a spouse/partner's plan or Affordable Care Act Marketplace |
| Termination while on disability insurance | Temporary protection from termination; the employer can usually still terminate and take away health insurance if the employee can't work |
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What You'll Learn
Short-term disability insurance
To qualify for short-term disability benefits, employees must be unable to perform their regular job duties and may need to provide medical documentation to prove their inability to work. The specific conditions and duration of benefits can vary by state and individual policy. For example, some policies may only cover non-work-related illnesses or injuries, whereas others may include work-related conditions. It is important to note that short-term disability insurance is not designed to provide benefits for minor illnesses, such as the flu, but for more serious and prolonged conditions.
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$18.95 $18.95
Long-term disability insurance
LTD policies typically have an elimination or waiting period before benefits are paid out, which can range from 3 to 26 weeks, with 90 days being common. During this time, individuals may need to rely on emergency funds or short-term disability insurance to cover their expenses. LTD benefits can be paid out for a set period, such as 2, 5, or 10 years, or until the individual reaches their retirement age.
To qualify for LTD benefits, individuals must have a medical condition that meets the Social Security Act (SSA) definition of disability, which is "having an illness or injury that is expected to last at least 12 months or if the condition may be considered terminal." LTD policies may also have additional exclusions and limitations, such as pre-existing conditions, crime-related injuries, disabilities that occur during incarceration, revoked professional licenses, self-inflicted injuries, participation in a riot, war or acts of war, and workplace injuries.
Most LTD policies have two definitions of disability: "Own Occupation" and "Any Occupation." During the Own Occupation period, which can last up to two years, benefits are payable if the individual cannot perform their regular job or a similar one. After this period, benefits are only payable if the individual is unable to perform any occupation for which they are reasonably qualified by education, training, or experience.
LTD insurance can be offered by employers as part of a benefits package, with employees typically paying a portion of the cost. Alternatively, individuals can purchase their own LTD policies, which may offer more flexibility and coverage than employer-sponsored plans. When deciding whether to purchase LTD insurance, individuals should consider their financial situation, the likelihood of becoming disabled, and their ability to cover expenses in the event of a long-term disability.
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Eligibility requirements
To be eligible for disability insurance, you must meet specific requirements, which vary depending on your circumstances and location. Here are the general eligibility requirements for disability insurance:
- Disability Definition: The definition of disability varies between programs. For Social Security Disability Insurance (SSDI), a disability is defined as a mental or physical impairment diagnosed by a healthcare professional that causes an inability to perform substantial gainful activity (SGA), such as work for profit or pay. The Social Security Administration (SSA) considers you to have a qualifying disability if your medical condition prevents you from working, adjusting to other work, or performing SGA.
- Duration of Disability: Your disability must have lasted or be expected to last for at least one year (12 consecutive months) or result in death. This is a strict requirement, as Social Security rules assume that working families have access to other resources, such as workers' compensation, insurance, savings, or investments, to cover short-term disabilities.
- Work History: You must have a sufficient work history to be eligible for disability benefits. The SSA uses earnings guidelines to evaluate whether your work activity qualifies as SGA. As of 2025, if your earnings average more than $1,620 per month ($2,700 if you are blind), you generally cannot be considered disabled.
- Age and Marital Status: Eligibility may depend on your age and marital status. For example, the Disabled Adult Child (DAC) benefits require the claimant to be unmarried and aged 18 or older, with a qualifying disability that started before age 22. DAC benefits typically end if the child gets married, except when marrying another DAC.
- Income and Resources: Your income and resources may impact your eligibility. Generally, disability insurance is available to those with low incomes or limited resources. If you are receiving full wages or have substantial earnings, you may not be eligible for disability benefits.
- Medical Certification: You will likely need to provide medical certification or an independent medical examination to verify your disability. This certification should be completed by a licensed healthcare professional who is treating you for your disability.
- Citizenship and Immigration: In some cases, citizenship and immigration status do not affect eligibility for disability insurance. However, specific programs or locations may have different requirements.
It is important to note that eligibility requirements may vary depending on your location and the specific disability insurance program you are applying for. Be sure to review the requirements for your specific situation and consult official sources or seek professional guidance if needed.
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Health insurance considerations
Disability insurance is a type of insurance that safeguards an employee's income if they experience a severe illness or injury that prevents them from performing their regular work duties. It is intended for long-term absences from work due to qualifying conditions, with a predetermined waiting period before benefits kick in. Both short-term and long-term disability insurance plans are available, with varying benefit periods, elimination periods, and benefit amounts. Short-term disability insurance typically covers a period of three to twelve months, while long-term disability insurance can provide coverage for an extended period, ranging from two to ten years or even longer. The benefit amount generally covers a percentage of the lost gross wages, usually between 40% and 80% of the employee's income.
When it comes to health insurance considerations, it's important to note that disability insurance does not inherently include health insurance coverage. The impact of going on disability insurance on your health insurance depends on the source of your health insurance plan. If you obtain health insurance through your spouse or partner's plan, you can usually maintain coverage while receiving disability benefits. Similarly, if you have purchased health insurance through the Affordable Care Act's Health Insurance Marketplace, you can typically continue your coverage as long as you can pay for it. However, you may need to pay more out of pocket if your disability results in increased medical expenses or frequent doctor's appointments.
On the other hand, if you receive health insurance benefits through your employer, you may be at risk of losing those benefits if your employment is terminated while you are on disability leave. Depending on the laws in your location, your employer may be temporarily prohibited from firing you while you are on disability insurance. However, this protection is generally temporary, and your employer can usually terminate your employment and health insurance coverage if your disability extends for a long period and you are unable to return to work. Therefore, it is important to explore alternative health insurance options if you anticipate a long-term disability that might result in the loss of your job-related health insurance coverage.
To mitigate the potential loss of health insurance, you can consider applying for coverage through the Affordable Care Act Marketplace if you are collecting disability benefits from a private plan. Additionally, if your income is low, you may qualify for Medicaid or become eligible for tax credits that can make health insurance policies more affordable. It is also worth noting that, in some cases, you may be protected by laws such as the Family and Medical Leave Act, which can help safeguard your job and, by extension, your health insurance coverage during a period of disability.
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Impact on employment
Disability insurance is a type of insurance that protects an employee's ability to earn a paycheck if they experience a severe illness or injury. It is not designed to provide benefits if an employee misses a week of work due to a minor illness like the flu. Instead, it provides coverage after a predetermined waiting period (called the elimination period) for conditions that would keep them from working for extended periods. Short-term disability insurance protects both the employee and the employer if the worker can no longer do their job due to covered illness or injury. Typically, this insurance policy is paid in full or in part by the employer, and the employee must be unable to perform their regular work duties to qualify for benefits under the policy. Short-term disability insurance may provide coverage when the employee is injured outside the workplace.
Long-term disability insurance, on the other hand, has a more extended benefit period that can average between 2 to 10 years and possibly longer. The coverage level in disability insurance refers to the percentage of an eligible employee's lost gross wages that will be covered during the benefit period. Both short-term and long-term disability coverage levels can be between 40% and 80% of lost wages.
In the United States, the Social Security Administration (SSA) established the Social Security disability insurance program (SSDI) to bridge the gap between when employees can’t return to work due to a disability and when they qualify for retirement benefits. SSDI provides coverage for your full retirement benefits until you’re eligible to receive payments through a traditional Social Security retirement plan. The SSA automatically sends payments for retirement benefits and stops SSDI coverage when you reach full retirement age (FRA).
Depending on where you work, it may be against the law for your employer to fire you while you’re on disability insurance. But these protections are usually temporary. You can still lose your job (and your health insurance) while you’re getting disability insurance benefits, though you may get some protections from acts like the Family and Medical Leave Act (FMLA) or the California Family Rights Act (CFRA). If you’re able to return to work, you might not lose your work-sponsored coverage. You can usually keep your health insurance on disability if you get coverage through your partner or spouse or if you pay for your own plan separate from work.
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Frequently asked questions
Disability insurance is a type of insurance that protects an employee's ability to earn an income if they experience a severe illness or injury. It is categorized as short-term and long-term, with varying benefit periods, elimination periods, and benefit amounts.
If you get your health insurance through your employer, you may lose your health insurance benefits if you go on disability leave. However, if you receive health insurance through a spouse or partner's plan, you should still be eligible for coverage while on disability.
The requirements to qualify for disability insurance benefits vary depending on the specific policy and jurisdiction. Generally, an individual must be unable to perform their regular work duties due to illness or injury to qualify for benefits. Additionally, there may be requirements regarding the duration of the disability, income level, and medical certification.
